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NO.  94 


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Author: 


U.S.  Interstate  Commerce 
Commission 

Title: 

Consolidation  of  railroads 


Place: 


[Washington,  D.C.] 


Date: 


[1921] 


MASTER   NEGATIVE   * 


COLUMBIA  UNIVERSITY  LIBRARIES 
PRESERVATION  DIVISION 

BIBLIOGRAPHIC  MICROFORM  TARGET 


ORIGINAL  MATERIAL  AS  "ILMEJ  -    2XIZ1MG  ^["  L.OGF.APHIw  R£:;OAD 


630 
Un332 


U.  S.    Interstate  commerce  commission. 

...  Consolidation  of  railroads.  In  the  matter  of  con- 
solidation of  the  railway  properties  of  the  United  States 
into  a  limited  number  of  systems.  August  3, 1921.  Ten- 
tative plan  of  the  commission.  [Washington,  Govt,  print, 
off.,  1921]  i'  ^ 

p.^  455-660    incl.  illus.  (maps)   tables.     31  fold,  maps,  diagrs.(l   fold.) 

Caption  title. 

Docket  no.  12964. 

"Appendix.  Report  to  the  Interstate  commerce  commission  on  consolida- 
tion of  railways  under  section  5,  paragraph  (4),  of  the  Interstate  commerce 
act,  by  William  Z.  Ripley.    1921" :  p.  465-660. 

-,  h  ^^lte?*^^~^*  S«.'l  Railroads— Consolidation]         i.  Ripley,  William 
Zebina,  1867-  ii.  Title.  — 

•  A  21-1329 

Railway  Economics.     Printed  by  L.  C. 
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MAIN  ENTRY:    U.S.  Interstate  Commerce  Commission 

Consolidation  of  railroads 


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INTERSTATE  COMMERCE  COM 


No.  12964. 
CONSOLIDATION  OF  RAILROADS. 
IN  THE  MATTER  OF  CONSOLIDATION  OF  THE  RAILWAY 
PROPERTIES  OF  THE  UNITED  STATES  INTO  A  LIMITED 
NUMBER  OF  SYSTEMS. 


Augusts,  1921 


_T)  sso 

Tentative  Plan  of  the  Commission.  i_^  Vi  ^  ^ 


By  the  Commission:  x^     rA\ 

This  tentative  plan  is  prepared  and  served  under  paragraphs  (4) 

and  (5)  of  section  5  of  the  interstate  commerce  act,  which  read  as 

follows '.  **• 

(4)  The  Commission  shall'las  soon  as  practicable  prepare  and  adopt  a  plan  for  the 
consohdation  of  the  railway  properties  of  the  continental  United  States  mtx)  a  himted 
^nmber  of  systems.  In  the  division  of  such  railways  into  such  systems  under  such 
In.  competition  shall  be  preser^-ed  a.  fully  as  possible  aiid  wherever  practicable 
the  existing  routes  and  channels  of  trade  and  commerce  shall  be  "^^^^^^f .  ^f  ^,^- 
^ect  to  the  foregoing  requirements,  the  several  systems  shall  be  so  arranged  that  the 
St  o^  transportation  a^  between  competitive  systems  and  as  related  to  the  values  of 
the  propertieTthrough  which  the  service  is  rendered  shall  be  the  same,  so  far  as  prac- 
ricable  so  that  these  systems  can  employ  uniform  rates  in  the  movement  of  compeU- 
dve  traffic  and  under  efficient  management  earn  substantially  the  same  rate  of  return 
apon  the  value  of  their  respective  railway  properties.  .,„-.. 

(5)  When  the  Commission  has  agreed  upon  a  tentative  plan,  it  shall  give  the  same 
due  publicity  and  upon  reasonable  notice,  including  notice  to  the  Governor  of  each 
Slate  shall  hear  all  persons  who  may  file  or  present  objections  thereto.  The  Commis- 
sion is  authorized  to  prescribe  a  procedure  for  such  hearings  and  to  fix  a  time  for 
bringing  them  to  a  close.  After  the  hearings  are  at  an  end.  the  Commission  shall 
adopt  a  plan  for  such  consolidation  and  publish  the  same;  but  it  may  at  any  time 
thereafter,  upon  its  own  motion  or  upon  appUcation,  reopen  the  subject  for  «uch 
changes  or  modifications  as  in  its  judgment  will  promote  the  pubhc  interest.  The 
consolidations  herein  pro\ided  for  shall  be  in  harmony  with  such  plan. 

Under  our  direction  Prof.  William  Z.  Ripley,  of  Harvard  Univer- 
sity, has  prepared  a  report  to  us,  which  is  the  appendix.  In  some 
respects  our  tentative  plan  does  not  follow  his  recommendations,  but 
presents  alternatives  thereto  for  like  consideration.  We  indicate  the 
main  differences.  We  have  sought  to  minimize  dismemberment  of 
existing  lines  or  systems.  This  tentative  plan  is  put  forward  m 
order  to  elicit  a  full  record  upon  which  the  plan  to  be  ultimately 
adopted  can  rest,  and  without  prejudgment  of  any  matters  which 
may  be  presented  upon  that  record.  Whenever  we  refer  to  a  prop- 
erty, the  properties  controlled  thereby  under  lease,  stock  ownership, 
or  otherwise  should  be  understood  as  included  unless  otherwise 
indicated. 


Ga  I.  c.  C. 

03763—21 1 


455 


I 


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i 


« 


^4  ■ 


456  INTERSTATE   COMMERCE   COMMISSION  REPORTS. 

We  find  for  the  purposes  of  this  tentative  plan  that  the  railway 
properties  of  the  continental  United  States  may  be  consolidated 
under  the  statute  into  the  following  systems : 

SYSTEM   NO.    1. — NEW   YORK   CENTRAL. 

New  York  Central. 

Pittsburgh  &  Lake  Erie. 

Rutland. 

Michigan  Central. 

Chicago,  Kalamazoo  &  Saginaw. 
Cleveland,  Cincinnati,  Chicago  &  St.  Louis. 
Cincinnati  Northern. 
Western  Maryland. 
Fonda,  Johnstown  &  Gloversville. 
Lake  Erie  &  Pittsburgh. 
Central  Indiana. 

Pittsburgh,  Chartiers  &  Youghiogheny. 
Monongahela. 
Boston  &  Maine. 
Maine  Central. 
Bangor  &  Aroostook. 

And  all  railway  properties  controlled  by  the  above  carriers  through 
lease,  stock  ownership,  or  otherwise,  except: 

Lake  Erie  &  Western  and  Toledo  &lBoth  now  controlled  by 

Ohio  Central.  J     New  York  Central. 

Zanesville  &  Western  and  Kanawha  &1  Both  now  controlled  by 
Michigan.  J     Toledo  &  Ohio  Central. 

Indiana  Harbor  Belt,  now  controlled  by  New  York  Central,  30 
per  cent;  Michigan  Central,  30  per  cent;  Chicago  &  North 
Western,  20  per  cent;  Chicago,  Milwaukee  &  St.  Paul,  20  per 
cent. 

Note. — Prof.  Ripley  recommends  the  inclusion  of  the  Western  Maryland  in  s^'stem 
No.  5,  Nickel  Plate-Lehigh  Valley. 

Prof.  Ripley  makes  no  specific  assignment  of  the  Fonda,  Johnstown  &  Gloversville. 

The  Lake  Erie  &  Pittsburgh;  Central  Indiana;  Pittsburgh,  Chartiers  &  Youghio- 
^eny;  and  Monongahela  may  be  incori)orated  in  either  system  No.  1  or  No.  2. 
Prof.  Ripley  mak^  no  specific  assignment  of  these  four  roads,  which  are  con- 
trolled jointly  in  the  interest  of  the  New  York  Central  and  the  Pennsylvania. 

The  Boston  &  Maine,  Maine  Central,  and  Bangor  &  Aroostook  may  be  included  in 
system  No.  7,  New  England,  or  system  No.  7a,  New  England-Great  Lakes.  Prof. 
Ripley  rejects  the  trunk  line  treatment  of  the  New  England  roads,  but  we  present 
this  alternative  with  a  view  to  developing  the  situation  upon  hearing. 

The  Lake  Erie  &  Western  may  be  included  in  system  No.  5,  Nickel  Plate-Lehigh 
Valley. 

The  Toledo  &  Ohio  Central,  Zanesville  &  Western,  and  Kanawha  &  Michigan  may 
be  included  in  system  No.  9,  Norfolk  &  Western. 

The  Indiana  Harbor  Belt  is  reserved  for  consideration  in  connection  with  terminal 
situations. 

63 1.  C.  C. 


oOLIDATION   OF  RAILROADS. 


SYSTEM   NO.   2. — PENNSYLVANIA. 


457 


Pennsylvania. 

West  Jersey  &  Seashore. 

Long  Island. 

Baltimore,  Chesapeake  &  Atlantic. 

Cumberland  Valley. 

Maryland,  Delaware  &  Virginia. 

New  York,  Philadelphia  &  Norfolk. 
Pittsburgh,  Cincinnati,  Chicago  &  St.  Louis. 

Waynesburg  &  Washington. 
Grand  Rapids  &  Indiana. 
Cincinnati,  Lebanon  &  Northern. 
Ohio  River  &  Western. 
Louisville  Bridge  &  Terminal. 
Wheeling  Terminal. 
Toledo,  Peoria  &  Western. 
Lorain,  Ashland  &  Southern. 
Lake  Erie  &  Pittsburgh. 
Central  Indiana. 

Pittsburgh,  Chartiers  &  Youghiogheny. 
Monongahela. 

And  all  other  railway  properties  controlled  by  any  of  the  above 
carriers  under  lease,  stock  ownership,  or  otherwise,  except  the 
Norfolk  &  Western  and  railway  properties  controlled  by  it,  which 
may  be  included  in  system  No.  9,  Norfolk  &  Western. 

Notes.— The  Lorain,  Ashland  &  Southern  may  be  included  in  system  No.  4,  Erie, 
which  owns  one-half  the  stock,  the  Pennsylvania  owning  the  other  "half. 

The  Lake  Erie  &  Pittsburgh;  Central  Indiana;  Pittsburgh,  Chartiers  &  Youghio- 
gheny; and  Monongahela  may  be  included  in  system  No.  1»  New  York  Central, 
which  controls  one-half  the  stock,  the  Pennsylvania  controlling  the  other  half. 

SYSTEM   NO.  3. — BALTIMORE    &   OHIO. 

Baltimore  &  Ohio. 

Sandy  Valley  &  Elkhorn. 

Staten  Island  Rapid  Transit. 
Reading  system,  comprising  the  Philadelphia  &  Reading,  Central 

Railroad  of  New  Jersey,  and  various  others. 
Cincinnati,  Indianapolis  &  Western. 
Chicago,  Indianapolis  &  I^ouisville. 
New  York,  New  Haven  &  Hartford. 

Central  New  England. 
Lehigh  &  New  England. 
Lehigh  &  Hudson. 
63I.C.C. 


r. 


i 


-t 


H 


458 


INTEBSTATE  COMMERCE  COMMISSION  BEPOBTS. 


Notes. — The  Baltimore  &  Ohio  Chicago  Terminal  is  reserved  for  consideration  in 
connection  with  terminal  situations. 

The  New  York,  New  Haven  &  Hartford:  Central  New  England;  Lehigh  &  New 
England;  and  Lehigh  &  Hudson  may  be  included  in  system  No.  7,  New  England,  or 
system  No.  7a,  New  England-Great  Lakes. 


SYSTEM   NO.    4. — ERIE. 


Erie. 


Chicago  &  Erie. 

New  Jersey  &  New  York. 

New  York,  Susquehanna  &  Western. 
Delaware  &  Hudson. 
Delaware,  Lackawanna  &  Western. 
Ulster  &  Delaware. 
Bessemer  &  Lake  Erie. 
Buffalo  &  Susquehanna. 
Pittsburg  &  Shawmut. 
Pittsburg,  Shawmut  &  Northern. 
Lorain,  Ashland  &  Southern. 
Wabash  lines  east  of  the  Missouri  River. 

Notes. — Prof.  Ripley  recommends  including  the  Lehigh  Valley  in  thi^  system; 
but  in  this  tentative  plan  that  carrier  is  proposed  as  a  main  stem  for  system  No.  5, 
Nickel  Plate-Lehigh  Valley. 

The  Delaware  &  Hudson,  Delaware,  Lackawanna  &  Western,  Ulster  &  Delaware, 
Pittsburg  &  Shawmut,  and  Pittsbiu-g,  Shawmut  &  Northern  may  be  included  in 
system  No.  7a,  New  England-Great  Lakes. 

The  Bessemer  &  Lake  Erie  may  be  included  in  system  No.  5,  Nickel  Plate-Lehigh 
VaUey. 

The  Lorain,  Ashland  &  Southern  may  be  included  in  system  No.  2,  Pennsylvania. 

SYSTEM   NO.   5. — NICKEL   PLATE-LEHIOH   VALLEY. 

Lehigh  Valley. 

New  York,  Chicago  &  St.  Louis. 
Toledo,  St.  Louis  &  Western. 
Detroit  &  Toledo  Shore  Line. 
Lake  Erie  &  Western. 
Wheeling  &  Lake  Erie. 
Pittsburgh  &  West  Virginia. 
Bessemer  &  Lake  Erie. 

Notes. — Prof.  Ripley  recommends  the  Lackawanna  as  main  stem  in  this  system. 
In  this  tentative  plan  it  is  replaced  for  that  purpose  by  the  Lehigh  Valley,  and  made 
available  for  either  system  No.  7a,  New  England-Great  Lakes,  or  system  No.  4,  Erie. 
He  also  includes  the  Buffalo,  Rochester  &  Pittsburgh  and  Wheeling  &  Lake  Erie  in 
this  system. 

The  Bessemer  &  Lake  Erie  may  be  included  in  system  No.  4,  Erie. 

68 1. 0. 0. 


CONSOMDATION  OP  RAILROADS. 


SYSTEM   NO.   6. — PERE   MARQUETTE. 


459 


Pere  Marquette. 

Detroit  &  Mackinac. 

Ann  Arbor. 

Detroit,  Toledo  &  Ironton. 

Boyne  City,  Gaylord  &  Alpena. 

Note. — The  last-named  road  is  a  class-II  road  not  specifically  covered  by  Prof. 
Ripley's  report. 

SYSTEM   NO.    7. — NEW  ENGLAND. 

New  York,  New  Haven  &  Hartford. 

New  York,  Ontario  &  Western. 

Central  New  England. 
Boston  &  Maine. 
Maine  Central. 
Bangor  &  Aroostook. 
Lehigh  &  Hudson  River. 
Lehigh  &  New  England. 

Notes. — Prof.  Ripley  recommends  inclusion  of  the  New  York,  Ontario  &  Western 
in  system  No.  4,  Erie. 

The  Lehigh  &  Hudson  River  is  not  included  in  any  system  under  Prof.  Ripley's 
report,  but  is  left  as  a  "bridge  line. " 

SYSTEM   NO.    7A. — NEW   ENGLAND-GREAT   LAKES. 

Same  as  system  No.  7  with  addition  of  the  following,  which  other- 
wise with  the  exception  of  the  Buffalo,  Rochester  &  Pittsburgh 
may  be  included  in  system  No.  4,  Erie.  That  carrier  may  be 
included  in  system  No.  5,  Nickel  Plate-Lehigh  Valley. 

Delaware  &  Hudson. 

Ulster  &  Delaware. 

Delaware,  Lackawanna  &  Western. 

Buffalo,  Rochester  &  Pittsburgh.   *       • 

Pittsburg  &  Shawmut. 

Pittsburg,  Shawmut  &  Northern. 

Note. — ^The  addition  of  these  lines  has  not  been  recommended  by  Prof.  Ripley. 

SYSTEM  NO.  8. — CHESAPEAKE  &  OHIO. 

Chesapeake  &  Ohio. 
Hocking  Valley. 
Virginian. 

Note. — Prof.  Ripley  recommends  consolidation  of  the  Virginian  with  the  Norfolk 
&  Western,  Toledo  &  Ohio  Central,  and  Kanawha  &  Michigan,  in  order  to  afford  a 
western  outlet  for  coal  originating  on  the  Virginian.    This  apparently  would  involve 

63 1.  C.  C. 


460 


INTERSTATE   COMMERCE   COMMISSION  REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


461 


'9 

HUH 


upgrade  eastbound  haul  of  westbound  coal  to  the  vicinity  of  Roanoke,  unless  there 
be  new  construction  near  Gauley  Bridge,  W.  Va.  The  Virginian's  present  outlet  to 
the  west  is  via  Deepwater,  W.  Va.,  and  the  Chesapeake  &  Ohio. 

SYSTEM  NO.  9. — NORFOLK  &  WESTERN. 

Norfolk  &  Western. 
Toledo  &  Ohio  Central. 

Zanesville  &  Western. 

Kanawha  &  Michigan. 

Kanawha  &  West  Virginia. 

Note.— From  the  Norfolk  &  Western  is  excepted  the  branch  from  Roanoke  to  Win- 
ston-Salem, which  may  be  included  in  system  No.  11,  Atlantic  Coast  Line-Louisville 
&  Nashville  and  the  branch  from  Lynchburg  to  Durham  which  may  be  included  in 
system  No.  12,  Illinois  Central-Seaboard. 

SYSTEM  NO.  10. — SOUTHERN. 

Southern. 

Alabama  Great  Southern. 

Georgia,  Southern  &  Florida. 

Mobile  &  Ohio. 

Southern  Railway  in  Mississippi. 

Northern  Alabama. 

Cincinnati,  New  Orleans  &  Texas  Pacific. 
New  Orleans  Great  Northern. 
Alabama  &  Vicksburg. 

Note.— Prof.  Ripley  recommends  inclusion  of  the  Georgia  Southern  &  Florida 
branch  from  Valdosta,  Ga.,  to  Palatka,  Fla.,  in  the  Seaboard  system. 

SYSTEM    NO.    11.— ATLANTIC     COAST    LINE-LOUISVILLE    A    NASHVILLE. 

Atlantic  Coast  Line. 

Atlanta  &  West  Point. 

Charleston  &  Western  Carolina. 

Louisville  &  Nashville.     • 

Nashville,  Chattanooga  &  St.  Louis. 
Louisville,  Henderson  &  St.  Louis. 
Western  Railway  of  Alabama. 
Richmond,  Fredericksburg  &  Potomac. 
Norfolk  Southern. 
Atlanta,  Birmingham  &  Atlantic. 
Winston-Salem  Southbound. 

Roanoke  to  Winston-Salem  branch  of  Norfolk  &  Western. 
Florida  East  Coast. 
Carolina,  Clinchfield  &  Ohio. 
Georgia  &  Florida. 

63 1.  C.  O. 


Gulf,  Mobile  &  Northern. 
Mississippi  Central. 

Notes. — Prof.  Ripley  recommends  that  the  Richmond,  Fredericksburg  &  Potomac 
and  Florida  East  Coast  retain  their  present  status  without  inclusion  in  any  system. 

The  Carolina,  Clinchfield  &  Ohio  may  be  included  in  system  No.  12,  Illinois  Cen- 
tral-Seaboard.   Prof.  Ripley  recommends  inclusion  in  system  No.  10,  Southern. 

The  Gulf,  Mobile  &  Northern  and  Mississippi  Central  are  not  specifically  included 
in  any  system  under  Prof.  Ripley's  report. 

SYSTEM  NO.  12 — ^ILLINOIS  CENTRAL-SEABOARD. 

Illinois  Central.  / 

Yazoo  &  Mississippi  Valley. 

Central  of  Georgia. 
Seaboard  Air  Line. 

Lynchburg,  Va.,  to  Durham,  N.  C,  branch  of  Norfolk  &  Western. 
Gulf  &  Ship  Island. 
Tennessee  Central. 
Carolina,  Clinchfield  &  Ohio. 

Notes. — Prof.  Ripley  recommends  that  a  separate  system  be  built  around  the 
Seaboard  Air  I^ine. 

The  Gulf  &  Ship  Island  is  not  included  in  any  system  by  Prof.  Ripley. 

The  Carolina,  Clinchfield  &  Ohio  may  be  included  in  system  No.  11,  Atlantic  Coast 
Line-Louisville  &  Nashville. 

SYSTEM  NO.  13. — UNION  PAOIFIC-NORTH  WESTERN, 

Union  Pacific. 

St.  Joseph  &  Grand  Island. 

Oregon  Short  Line. 

Oregon- Washington  Railroad  &  Navigation  Company. 

Los  Angeles  &  Salt  Lake. 
Chicago  &  North  Western. 

Chicago,  St.  Paul,  Minneapolis  &  Omaha. 
Lake  Superior  &  Ishpeming. 
Wabash  lines  west  of  the  Missouri  River. 

Notes. — Prof.  Ripley  recommends  inclusion  of  the  Central  Pacific  in  this  system. 
The  Lake  Superior  &  Ishpeming  is  not  specifically  included  in  any  system  by  Prof. 
Ripley.  ' 

SYSTEM  NO.  14. — BURLINGTON-NORTHERN   PACIFIO. 

Chicago,  Burlington  &  Quincy, 
Northern  Pacific. 
Chicago  Great  Western. 
Minneapolis  &  St.  Louis. 
Spokane,  Portland  &  Seattle. 
63 1,  a  C. 


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INTERSTATE   COMMERCE  COMMISSION   REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


463 


i 


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^ 


Notes.— From  the  Chicago,  Burlington  &  Quincy  are  excepted  the  Colorado  & 
Southern  and  Fort  Worth  &  Denver  City,  which  may  be  included  in  eystem  No.  16, 
Santa  Fe.  Prof.  Ripley  recommends  that  they  be  included  in  system  No.  19,  Chicago- 
Missouri  Pacific. 

Prof.  Ripley  recommends  extension  of  this  system  to  the  Pacific  coast  by  includ- 
ii^  the  Denver  &  Rio  Grande  and  the  Western  Pacific.  He  also  recommends  redis- 
tribution of  portions  of  the  Minneapolis  &  St.  Louis  and  Chicago  Great  Western. 

The  Spokane,  Portland  &  Seattle  may  be  included  in  system  No.  15,  Milwaukee- 
Great  Northern. 

SYSTEM   NO.  15. — MILWAUKEE-GREAT   NORTHERN. 

Chicago,  Milwaukee  &  St.  Paul. 
Great  Northern. 

Chicago,  Terre  Haute  &  Southeastern. 
Duluth  &  Iron  Range. 
Duluth,  Missabe  &  Northern. 
Green  Bay  &  Western. 
Spokane,  Portland  &  Seattle. 
Butte,  Anaconda  &  Pacific. 

Notes.— The  Green  Bay  &  Western  and  Butte,  Anaconda  &  Pacific  are  not  included 
in  any  system  under  Prof.  Ripley's  report. 

The  Spokane,  Portland  &  Seattle  may  be  included  in  system  No.  14,  Burlington- 
Northern  Pacific. 

Prof.  Ripley  recommends  that  the  eastern  half  of  the  Chicago  &  Eastern  Illinois 
be  included  in  this  system. 

SYSTEM   NO.  16. — SANTA   FE. 

Atchison,  Topeka  &  Santa  Fe. 

Gulf,  Colorado  &  Santa  Fe. 
Colorado  &  Southern. 

Fort  Worth  &  Denver  City. 
Denver  &  Rio  Grande. 
Western  Pacific. 
Utah  Railway. 
Northwestern  Pacific. 
Nevada  Northern. 

Notes.— Prof.  Ripley  recommends  inclusion  of  the  Colorado  &  Southern  and  the 
Fort  W^orth  &  Denver  City  in  the  Missouri  Pacific  system.  He  also  recommends 
inclusion  of  a  part  of  the  Gulf  Coast  Lines  in  the  above  system. 

Prof.  Ripley  recommends  that  the  Northwestern  Pacific  retain  its  present  status. 

The  Nevada  Northern  is  not  specifically  included  in  any  system  by  Prof.  Ripley. 
It  may  be  included  in  system  No.  17,  Southern  Pacific-Rock  Island. 

SYSTEM   NO.  17. — SOUTHERN   PACIFIC-ROOK  ISLAND. 

Southern  Pacific  Company. 
Nevada  Northern. 
Chicago,  Rock  Island  &  Pacific. 
Chicago,  Rock  Island  &  Gulf. 

63  Lao. 


Arizona  <fe  New  Mexico. 

El  Paso  &  Southwestern. 

San  Antonio  &  Aransas  Pass. 

Trinity  &  Brazos  Valley. 

Midland  Valley. 

Vicksburg,  Shreveport  &  Pacific. 

Chicago,  Peoria  &  St.  Louis. 

Notes. — The  Nevada  Northern  may  be  included  in  system  No.  16,  Santa  Fe. 

The  Arizona  &  New  Mexico  and  Chicago,  Peoria  &  St.  Louis  are  not  specifically 
included  in  any  system  by  Prof.  Ripley. 

The  Trinity  &  Brazos  Valley  may  be  included  in  system  No.  18,  Frisco- Katy-Cotton 
Belt.    So  recommended  by  Prof.  Ripley. 

Prof.  Ripley  recommends  redistribution  of  portions  of  the  carriers  included  by  us 
in  this  system. 

SYSTEM  NO.  18. — FRISCO-KATY  COTTON  BELT. 

St.  Louis-San  Francisco. 

St.  Louis  Southwestern. 

Louisiana  Railway  &  Navigation  Company. 

Chicago  &  Alton. 

Missouri,  Kansas  &  Texas. 

Trinity  &  Brazos  Valley. 

San  Antonio,  Uvalde  &  Gulf. 

Notes.— The  Trinity  &  Brazos  Valley  may  be  included  in  system  No.  17,  South- 
ern Pacific-Rock  Island. 

Pro!'.  Ripley  recommends  inclusion  of  the  San  Antonio,  Uvalde  &  Gulf  in  either 
system  No.  17,  Southern  Pacific-Rock  Island,  or  in  a  Southwestern-Gulf  system. 

Prof.  Ripley  recommends  redistribution  of  portions  of  the  carriers  included  by  us 
in  this  system. 

SYSTEM  NO.  19. — CHICAGO-MISSOURI  PACIFIC. 

Chicago  &  Eastern  Illinois. 
Missouri  Pacific. 
Kansas  City  Southern. 
Kansas  City,  Mexico  &  Orient. 
Kansas,  Oklahoma  &  Gulf. 
Texas  &  Pacific. 
Fort  Smith  &  Western. 
Louisiana  &  Arkansas. 
Gulf  Coast  Lines. 
International  &  Great  Northern. 

Note.— Prof.  Ripley  recommends  redistribution  of  portions  of  the  carriers  include<l 
by  us  in  this  system. 

63 1.  C.  C. 


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INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


i 


Hi 


I 


Certain  lines  such  as  the  Minneapolis,  St.  Paul  &  Sault  Ste.  Marie 
and  the  Central  Vermont,  which  are  controlled  by  Canadian  carriers, 
have  not  been  specifically  included  in  this  tentative  plan  because 
these  lines  form  parts  of  through  transcontinental  Canadian  systems 
in  active  competition  with  systems  above  set  forth. 

The  carriers  included  in  this  tentative  plan  comprise  most  of  the 
class-I  steam  railroads  but  very  few  of  those  in  class  II  and  class  III. 
Those  not  so  included,  whether  industrial  coromon  carriers,  terminal 
carriers,  interurban  electric  railways  operated  as  a  part  of  general 
steam  railroad  systems  of  transportation  or  engaged  in  the  general 
transportation  of  freight,  ''short  lines,"  or  others,  will  be  considered 
at  the  hearings  to  be  hereafter  assigned  so  that  in  the  plan  to  be 
ultimately  adopted  provision  can  be  made  for  their  inclusion  in  the 
systems. 

We  have  not  specifically  mentioned  water  carriers.  Where  these 
carriers  are  now  controlled  by  carriers  by  rail  they  will  be  considered 
as  being  included  tentatively  in  the  systems  in  which  the  controlling 
rail  carrier  has  been  included. 

as  I.  c.  c. 


ORDER. 

At  a  General  Session  of  the  INTERSTATE  COMMERCE 
COMMISSION,  held  at  its  office  in  Washington,  D.  C, 
on  the  3d  day  of  August,  A.  D.  1921. 

No.  12964. 

Consolidation  of  Railroads. 

In  the  Matter  of  Consolidation  of  the  Railway  Properties  of  the  United  States  into  a 

Limited  Number  of  Systems. 

It  appearing,  That  the  Commission  having  on  the  date  hereof 
agreed  upon  a  tentative  plan  for  the  consolidation  of  the  railway 
properties  of  the  continental  United  States  into  a  limited  number  of 
systems,  which  tentative  plan  is  hereby  referred  to  and  made  a  part 
hereof: 

It  is  ordered,  That  said  tentative  plan  be  served  upon  the  respond- 
ents to  this  proceeding;  that  notice  to  each  state  shall  be  gi\ea  by 
sending  copies  of  this  order,  and  of  said  tentative  plan,  by  registered 
mail,  addressed  to  the  governor  of  each  state  at  the  capitol  of  each 
state,  and  that  notice  be  given  to  the  public  by  depositing  a  copy  of 
this  order  and  of  said  tentative  plan  in  the  office  of  the  secretary  of 
the  Commission,  at  Washington,  D.  C. 

It  is  further  ordered,  That  this  proceeding  be  assigned  for  hearing 
at  such  times  and  places  as  the  Commission  may  hereafter  direct. 

By  the  Commission. 

[seal.]  George  B.  MoGintt, 

Secretary, 


\ 


« 


I 


APPENDIX 


REPORT 


TO  THE 


INTERSTATE  COMMERCE  COMMISSION 


ON 


CONSOLIDATION  OF  RAILWAYS 

Under  Section  5,  Paragraph  (4).  of  the 
Interstate  Commerce  Act 


BY 

WILLIAM  Z.  RIPLEY 


1921 


691.  G.a 


mt 


CONTENTS. 


Page. 

Outline  of  proposed  plan 469 

Topical  outline 470 

Introduction 475 

Chapter  I. — Trunk  line  territory 485 

Chapter  II. — New  England  region 509 

Chapter  III. — Chesapeake  region 526 

Chapter  IV. — Southeastern  region 535 

Chapter  V. — Western  transcontinental  region 556 

Chapter  VI. — Southwestern-Gulf  region 614 

Chapter  VII. — Recapitulation 635 

Statistical  exhibits 648 

Index  of  railroads 655 

Explanatory  Text  to  Statistical  Exhibfts. 

Exhibit  1> — ^Trunk  Une  territory 506 

Exhibit  2. — ^Michigan  peninsula  roads 5O6 

Exhibit  3. — New  England  region 524 

Exhibit  4. — Chesapeake  region 534 

Exhibit  5  and  5-A. — Southeastern  region 538, 555 

Exhibit  6  and  6-A . — Western  transcontinental  region 613 ' 

Exhibit  7. — Southwestern-Gulf  region 634 

Exhibit  8 . — Grand  summary  of  twenty-one  proposed  systems 638 

List  op  Maps. 

1.  Showing  available  stems  in  trunk  line  territory. 

2.  The  Pennsylvania  system. 

3.  The  New  York  Central  system. 

4.  The  Baltimore  &  Ohio-Reading  system. 

5.  The  Erie-Lehigh  Valley- Wabash  system. 

6.  Lackawanna-Nickel  Plate-Clover  Leaf  system. 

7.  The  Michigan  peninsula  system. 
7-a.  Michigan  railroads. 

8.  New  England  railroads  and  connections  as  also  contributing  coal  fields. 

9.  The  Chesapeake  group. 

10.  The  Southern  Railway  system. 

11.  Louisville  &  Nashville-Atlantic  Coast  line  system. 

12.  The  Illinois  Central  system. 

13.  The  Seaboard  Air  Line  system. 

14.  Main  stems  of  western  transcontinental  systems. 

15.  The  Union  Pacific-North  Western  system. 

16.  The  BurUngton-Northern  Pacific  system. 

17.  The  St.  Paul-Great  Northern  system. 

63I.G.C.  *  467 


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INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


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469 


17-a.  Possible  northwestern  transcontinental  systems. 

19.  Proposed  Burlington-Northern  Pacific  and  St.  Paul-Great  Northern  systems. 

20.  Proposed  Union  Pacific-Chicago  &  North  Western  and  Burhngton-Northem 
Pacific  systems. 

21.  Proposed  Union  Pacific-Chicago  &  North  Western  and  St.  Paul-Great  Northern 
systems. 

22.  Santa  Fe  system. 

23.  Rock  Island-Southern  Pacific  system. 

24.  Proposed  Rock  Island-Southern  Pacific  and  Santa  Fe  systems. 

25.  St.  Louis  &  San  Francisco  system. 

26.  Missouri  Pacific-Gulf  system. 

26-a.  Proposed  St.  Louis-San  Francisco  and  Missouri  Pacific  systems. 

27.  Main  stems  of  proposed  railway  systems. 

63  I.  C.  C. 


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PROPOSED  RAILROAD  CONSOLIDATION  PLAN. 

UNDER  SECTION  5,  PARAGRAPH  (4),  OF  THE   INTERSTATE   COMMERCE   ACT. 


1. 
o 


Trunk  Line  Region: 

Pennsylvania  system. 

New  York  Central  system  (less  Toledo  &  Ohio  Central,  Kanawha  &  Michigan, 
and  Lake  Erie  &  Western). 

3.  Baltimore  &  Ohio— Reading  system  (including  Central  of  New  Jersey  and 

Monon). 

4.  Erie — Lehigh  Valley — Wabash  system  (Delaware  &  Hudson,  Wabash  lines 

east,  Bessemer  &  Lake  Erie,  etc.). 

5.  Lackawanna— Nickel  Plate — Clover  Leaf  system  (also  includes  Wheeling  & 

Lake  Erie — ^Western  Maryland — Lake  Erie  &  Western — Buffalo,  Rochester 
&  Pittsburgh,  etc.). 
Chesapeake  Bay  Lake-to-Tide  Soft-Coal  Region: 

6.  Chesapeake  &  Ohio  system. 

7.  Norfolk  &  Western — Sandusky  system  (extended  to  Lake  Erie). 

8.  Virginian — ^Kanawha — Toledo  system  (including  Toledo  &  Ohio  Central  and 

Kanawha  &  Michigan). 
(Or  7  and  8  combined.) 
Soitheastern  Region: 

9.  Southern  Railway  system  (with  certain  minor  changes). 

10.  Louisville  &  Nashville — Atlantic  Coast  Line  system  (plus  Atlanta,  Birming- 

ham &  Atlantic,  etc.). 

11.  Illinois  Central — Central  of  Georgia  system  (certain  details  modified). 

12.  Seaboard  Air  Line  system. 
Western  Transcontinental  Region: 

13.  Union  Pacific — Chicago  &  North  Western  system  (plus  Central  Pacific;  also 

western  Wabash  lines,  etc.). 

14.  Burlington — Northern  Pacific — Denver  &  Rio  Grande — Western  Pacific  sys- 

tem (Chicago  Great  Western;  Minneapolis  &  St.  Louis  [parts],  etc.). 

15.  Chicago,  Milwaukee  &  St.  Paul — Great  Northern  system  (east  part  of  Chicago 

&  Eastern  Illinois  and  iron-ore  roads). 

16.  Atchison,  Topeka  &  Santa  Fe  system  (with  line  into  St.  Louis;  Gulf  Coast, 

etc.), 

17.  Southern  Pacific — Rock  Island  system  (part  of  St.  Louis  Southwestern,  etc.). 
(tulf  Region  (west  of  Mississippi,  south  of  St.  Louis  and  Kansas  City):  . 

18.  St.  Louis  &  San  Francisco  system  (with  Katy  [part];  St.  Louis  Southwestern 

[part],  etc.;  Alton). 

19.  Missouri  Pacific — Iron  Mountain  system  (including  Kansas  City  Southern, 

etc.;  Chicago  &  Eastern  Illinois,  western  half). 
Independent  Regional  Groups: 

20.  New  England  system  (except  Boston  &  Albany  and  Grand  Trunk  lines). 

21.  Michigan  peninsula  system  (Pere  Marquette;  Ann  Arbor,  and  Ironton). 

22.  Florida  East  Coast  Railway. 

63  I.  a  c. 

63763—21 2 


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470 


INTEKSTATE  COMMERCE  COMMISSION  REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


471 


w 


TOPICAL  OUTLINE. 


INTRODUCTION. 


V 


Text  of  the  statute  as  to  consolidation  into  systems,  475. — Other  correlative  sections, 
as  to  leases  and  mergers,  quoted,  475. — The  purpose  and  spirit  of  the  act,  4^6. — Its  legis- 
lative history,  476. — Relation  to  the  new  statutory  definition  of  reasonable  rates,  476. — 
Three  requirements  as  to  procedure  in  consolidation,  476. — Different  methods  of 
approach,  finances,  traffic,  and  operation,  477. — ^Broad  outlines  tested  by  details  for 
practicability,  478.— The  employment  of  statistical  data,  478.— Its  limitations,  478.— 
Certain  data  for  1917  compiled  for  ready  reference,  478. — ^Mileag*^  comprehended,  and 
the  proportion  of  short  lines  still  to  be  assigned  place,  479. 

The  test  of  competitive  ability,  479. — Not  size  but  more  evenly  balanced  opportu- 
nity, 479. — The  geographical  scope  of  systems,  480.— Conforming  to  the  customary  rate- 
making  areas,  480. — Shall  these  regional  boundaries  be  rigidly  or  loosely  drawn?  481. — 
Is  corporate  dismemberment  permissible?  481. — Definition  of  ''weak"  and*'eitrong" 
roads,  481. — The  difficulty  incident  to  affinity  between  weak  roads,  481. — Financial 
reorganization  as  a  prerequisite  to  consolidation,  482. — Constitutionality  of  the  new 
l^;islation  conferring  administrative  in  place  of  judicial  control  over  corporate  rela- 
tionships taken  for  granted.  482. — Unification  of  terminals  also  a  prerequisite,  483. — 
Relation  of  consolidation  to  alternate  routes  and  gateways,  484. — Broader  aspects  of  a 
comprehensive  national  policy,  484. 

CHAPTER  I. — TRUNK  LINE   TERRITORY. 

Elements  of  the  situation  stated,  485. — Five  east-and-west  stems  available,  486. — Are 
there  enough  branches  and  feeders  for  five  or  only  four  systems?  487. — The  components 
for  only  four  systems  too  competitive  and  unnaturally  related,  487. — Five  systems 
appear  necessary,  488. 

The  New  York  Central  system  slightly  reduced,  488.— Transfer  of  Lake  Erie  & 
Western,  488.— Also  the  Toledo  &  Ohio  Central,  and  the  Kanawha  &  Michigan,  488.— 
The  Rutland  Railroad  and  possibly  the  Worcester,  Nashua  &  Portland  added,  489. 

The  Pennsylvania  system  already  large  enough,  489. — The  Norfolk  &  Western  con- 
trol, 489. 

The  Baltimore  &  Ohio  system  needs  stated,  490.— Strengthening  the  western  end  by 
the  Monon,  490. — The  New  York  terminal  situation,  490. — Baltimore  &  Ohio  investment 
in  the  Philadelphia  &  Reading,  491. — Shall  the  Reading  be  absorbed  or  treated  as  an 
independent  terminal  property?  491.— The  geographic  situation  (map),  491. — Analysis 
of  Reading  traffic  interchange  (diagram),  492.— The  terminal  situation  again,  493.— 
Western  Maryland  relationships,  493.— Legal  obstacles  to  its  merger,  494.— The  Pere 
Marquette  connection.  494. 

The  present  Erie  system  described,  495. — The  Delaware  &  Hudson  added,  495. — 
New  York.  Ontario  &  Western  added,  mainly  for  its  terminal  rights,  495. — The  Lehigh 
Valley  contributes  strength,  496.— The  Wabash  eastern  lines  reach  St.  Louis,  496. — 
Pittsburgh  problem  stated,  496.— Status  of  the  Bessemer  &  Lake  Erie,  496.— United 
States  Steel  Corporation  claims  independence,  497. — ^Its  contentions  met.  498. — ^Effect 
of  inclusion  of  the  Bessemer  road,  498. 

The  New  York,  Chicago  &  St.  Louis  (Nickel  Plate)  stem,  499.— The  Delaware, 
Lackawanna  &  Western,  499.— The  Clover  Leaf  line  to  St.  Louis,  499.— Lake  Erie  & 
Western  and  other  additions,  499.— Access  to  Pittsburgh  via  Wheeling  &  Lake  Erie 

63 1.  C.  C. 


500. — ^Baltimore  and  the  Western  Maryland,  500. — Southern  detour  about  Washington, 
501. — ^Buffalo,  Rochester  &  Pittsburgh  adds  traffic,  501. — Comparative  statistics,  501. — 
The  Lackawanna  system  and  the  New  England  roads,  502. 

The  Michigan  peninsula  traffic,  502. — ^An  independent  group  or  parceled  among  the 
trunk  lines?  503. — ^Difficulty  of  partition  stated,  503. — Similarity  to  New  England 
situation,  503. — ^The  Ironton  added  as  a  fuel  Une,  505. — ^The  American  lines  in  Canada, 
505. 

The  Lehigh  &  Hudson  and  Lehigh  &  New  England  as  "bridges, ' '  506. — Independent 
or  assigned  to  New  England  group,  506. 

Statistical  analysis,  based  upon  exhibits,  506. 
••  • 

CHAPTER  n. — THE   NEW   ENGLAND  REGION. 

Geographic  peculiarities  of  New  England,  509. — Gateways  and  rail  connections 
(map),  510. — ^Volume  of  traffic  by  gateways  analyzed,  510. — ^Excess  of  inbound  tonnage 
and  character  of  shipments,  512. — Interchange  wiCh  outside  companies  analyzed 
(diagram),  512. 

The  advantages  of  trunk  line  plans  outlined,  514. — Objections  to  Pennsylvania- 
New  Haven  alliance,  515. — ^A  New  York  Central-Boston  &  Maine  merger  also  objec- 
tionable, 516. — ^Alternative  alliance  with  Erie  and  Lackawanna-Nickel  Plate,  517. 

The  plan  forr^onal  consolidation  described,  517. — ^Advantages  as  respects  outside 
relationships,  especially  routing,  518. — ^Effect  upon  dealings  concerning  division  of 
through  rates,  519. — Coal  supply  and  a  possible  common  fuel  line,  519. — Coastwise 
traffic  encouraged  and  Canadian  differential  lines,  519. — ^Proposed  fuel  line  to  Harris- 
burg  by  consolidation  of  all  New  England  lines  with  Lehigh  &  New  England,  520. — 
Possible  merger  with  certain  trunk  line  coal  roads,  521. — ^Domestic  intra-New  England 
considerations,  522. — Concentration  of  local  interest  and  responsibility,  commercial, 
financial,  and  political,  522. — Legal  aspect  as  to  preservation  of  competition  met,  523. — 
The  outstanding  objection  of  financial  weakness,  523. — ^The  aevelopment  of  Boston  as 
a  seaport,  524. — ^Final  acceptance  of  the  regional  plan  as  compelled  by  circumstances, 
525. 

CHAPTER  in. — CHESAPEAKE  REGION  (LAKE-TO-TIDE,  SOFT  COAL). 

Three  railroads  based  on  (Chesapeake  Bay,  described,  526. — Specialization  in  coal 
traffic,  526.— The  geographic  location  (map),  527.— Technique  of  coal  road  operation, 
528.— Two  varieties  of  coal,  528.— Eastern  and  western  markets  described,  529. 

Need  of  Jlexibility  in  carriage  east  and  west,  529. — ^Plans  for  Virginian  Railway 
extension  to  Toledo  (map),  530.— Involved  history  of  Toledo  &  Ohio  Central  and 
Kanawha  &  Michigan,  530.— Norfolk  &  Western  extension  to  Lake  Erie,  530.— 
Pennsylvania  Railroad  claims  for  continued  control,  532. — Consolidation  of  Virginian 
and  Norfolk  &  Western  feasible,  533.— Possible  joint  use  of  two  Toledo  &  Ohio  Central 
Unes,  533. 

Statistical  verification,  534. 

CHAPTER  IV. — THE   SOUTHEASTERN   REGION. 

Southern  transportation  conditions  contrast  sharply  with  trunk  line  and  western 
situation,  535. — ^East-and-west  division  by  the  Allegheny  range,  536. — Greater  unity 
recently  promoted  by  raib-oad  systems,  especially  the  Southern,  536.— Unity  some- 
what less  apparent  between  Louisville  &  Nashville  and  Atlantic  Coast  Line,  537.— 
MutuaUty  of  interest  lacking  between  Illinois  Central  and  Seaboard  Air  Line,  537.— 
Main  stems  (map)  as  indicating  unity  of  southern  systems,  537.— Statistical  com- 
parison of  the  four  leading  systems,  538.— Southern  seaport  development  and  railroad 
policy,  538. 

esLac. 


472 


INTERSTATE   COMMERCE  COMMISSION  REPORTS. 


CONSOLIDATION  OF  RAILROADS. 


473 


i 


H 


The  Southern  Railway  system  logical  and  compact,  539. — Relation  to  the  Mobile  & 
Ohio,  539. — ^Decisive  objections  to  transfer  of  the  Louisvill^St.  Louis  division,  540. — 
Corporate  structure  of  the  Queen  &  Crescent  Line,  540.^Relation  to  the  Carolina, 
Clinchfield  &  Ohio,  541. — The  Georgia  Southern  &  Florida  and  New  Orleans  Great 
Northern  included,  541. 

The  Louisville  &  Nashville  as  a  complete  and  satisfactory  system,  542. — Interest 
in  the  Atlanta,  Birmingham  &  Atlantic,  542. — Division  of  the  field  between  Atlantic 
Coast  Line  and  the  Southern  Railway  in  relation  thereto,  543. — The  Georgia  & 
Florida  Railway  and  the  Atlanta-Montgomery  lines  considered,  also  the  Norfolk 
Southern,  544.— Divorce  of  theMonon,  545. — ^Addition  of  the  Winston-Salem  branch 
of  the  Norfolk  &  Western,  545. — Proposal  to  actually  merge  the  Louisville  &  Nash- 
ville and  the  Atlantic  C^w^t  Line  Railway,  546. 

Shall  the  Seaboard  Air  Line  system  remain  independent?  546. — Relation  to  the 
Georgia  Southern  &  Florida  Railway,  547. — Addition  of  the  Durham  branch  of  the 
Norfolk  &  Western  Railway,  547. 

Inherent  strength  of  the  Illinois  Central  system,  548. — The  proposal  to  dissociate 
the  western  line  across  Illinois  and  Iowa  rejected,  548. — Possible  incorporation  of  the 
Memphis-Birmingham  division  of  the  Frisco  system,  549. — The  Yazoo  &  Mississippi 
road  left  undisturbed,  550. 

The  Carolina,  Clinchfield  &  Ohio  road  as  strategically  located,  550. — Its  relation 
to  southeastern  coal  supply,  551. — Importance  as  a  connection  for  neighboring  rail- 
roads, 551.— Development  of  its  traffic  relationships,  552. — ^Merger  with  Southern 
Railway,  reserving  trackage  rights  for  others,  recommended,  553. 

The  Washington-Richmond  to  remain  a  joint  line  as  at  present,  554. 

The  Florida  East  ('oast  Railway  to  remain  an  independent  bridge  line,  555. 

Statistical  confirmation,  555. 

CHAPTER  v. — THE   WESTERN  TRANSCONTINENTAL  REGION. 

Through  routes  determined  primarily  by  seven  available  Rocky  Moimtain  gate- 
ways, 557. — ^Matching  these  within  three  groups,  as  also  group  j^ainst  group,  558. — 
Geographical  distribution  of  mileage  based  on  population,  a  complication,  558. — 
Denver  conditions  as  an  illustration,  559. — ^Decision  to  extend  all  systems  into 
Chicago,  559. — Traffic  analysis,  indicating  importance  of  carloads  and  of  special 
equipment  in  solid  traiAloads,  559. 

The  western  situation  most  broadly  considered,  560. — The  Union  Pacific,  a  key 
road,  strongest  and  most  direct  through  line,  560. — The  Western  Pacific-Denver  & 
Rio  Grande  also  pivotal  as  a  matched  bridge  line,  561. — The  Burlington  as  a  support 
for  the  precarious  bridge,  matched  against  the  Union  Pacific,  562. — Burlington  must 
derive  added  strength  from  a  northern  through  line,  562. — The  Santa  Fe,  a  second 
possible  supporter  of  the  Western  Pacific-Denver  &  Rio  Grande  bridge,  562. — ^Tho 
Chambers  comprehensive  plan,  its  advantages  and  defects,  563. — ^Possible  modifica- 
tions of  a  Santa  Fe-Denver  &  Rio  Grande  plan,  564. — General  competitive  situation, 
north  and  south,  especially  the  Panama  Canal,  as  affecting  a  choice  between  the  Biur- 
lington  and  the  Santa  Fe,  565. — Final  selection  of  the  Burlington  road  as  coimterpoise 
}or  the  Union  Pacific,  566. 

The  northern  twin  cities  transcontinental  group  described,  566. — Objection  on 
competitive  grounds  to  three  northwestern  through  systems,  567. — Not  enough  good 
Chicago  connections  for  three  such  systems,  567. — Two  instead  of  three  chosen,  568. — 
Broader  advantages  considered,  568. — A  Burlington-Northern  Pacific-Western  Pacific 
combination  necessary  as  a  counterpart  of  the  Union  Pacific-Northwestem-Central 
Pacific  line,  563. — ^Alternatives  considered  spell  widespread  dismemberments,  568. — 
St.  Paul-Northern  Pacific  combination  advantageous  for  operation,  bat  fatal  to  compe- 
tition, 569. — ^Merits  of  a  St.  Paul-Great  Northern  miei^er,  commercial  and  financial, 

63 1.  C.  C. 


commend  this  choice,  569.— The  final  test  of  financial  stability,  570.— Western  addi- 
tions necessary  to  round  out  such  a  system,  573.— Proposed  changes  at  the  eastern, 
end,  573.— The  Soo  lines  added,  if  available  for  consolidation,  595.— Other  possible 
reenforcement,  573. 

The  Union  Pacific  closely  related  to  the  Chicago  &  North  Western  at  Omaha,  573.— 
The  Wabash  western  lines  for  a  Union  Pacific  entrance  to  St.  Louis,  with  minor 
eastern  additions,  575.— Judicial  attempts  to  separate  the  Central  Pacific  from  the 
Southern  Pacific,  575.— These  two  properties,  historically  and  organically  inter- 
related, 576.— The  geographical  location  indicating  interdependence  (map),  576.— 
Financial  relationships  also  intricate,  577.— This  case  to  be  judged  by  economic 
rather  than  legal  reasoning,  578.— Complete  country-wdde,  not  half-hearted  or  local 
competition,  essential,  578.— General  outline  of  transcontinental  competition,  578.— 
Territorial  limitation  of  Sunset  Route  competition,  579.— Theoretically,  north-and- 
south  gathering  lines  distinct  from  east-and-west  long-haul  lines  desirable,  579.— 
Physical  upbuilding  and  development  of  Central  Pacific  favored  by  unmerger,  580.— 
The  Pacific  Railroad  acts  again,  580.— Finally  Central  Pacific  merger  needed  to 
balance  the  Burlington-Western  Pacific  through  line,  580.— Temporary  prejudicial 
effect  upon  local  transportation,  a  valid  objection,  581.— Agreement  for  dissolution 
in  1914  establishes  practicabilit>%  581.— Pacific  coast  public  sentiment  versus  national 
interest  and  policy,  586.— Possible  advantages  of  transfer  of  Southern  Pacific  lines  in 
Oregon  to  the  Union  Pacific,  587.— Objections  thereto  are  conclusive,  587.— National 
defense  requires  completion  of  an  interior  north  and  south  line  of  communication. 
589.— Recapitulation  of  distribution  of  California  and  Oregon  lines,  590. 

Chicago,  Burlington  &  Quincy  Northern  Pacific  to  preserve  balance  of  power  against 
the  Union  Pacific  Northwestern,  590.-  Traffic  interchange  at  Billings,  Mont.,  591.— 
The  Denver  &  Salt  Lake  project  essential  to  future  development,  592.— Its  relation 
to  Denver  &  Rio  Grande  and  Western  Pacific,  592.— Alternative  alliance,  592.— 
Tenninals  at  San  Francisco,  592.— Chicago  Great  Western  provides  necessary  con- 
nections between  twin  cities  and  Missouri  River  gateways,  593.— The  Minneapolis 
&  St.  Louis  used  still  further  to  supplement  deficiencies  southwest  of  Minneapolis 
and  St.  Paul,  594.— Northern  Pacific  should  have  trackage  into  Great  Falls,  Mont., 
district,  594.— The  possible  inclusion  of  the  Mobile  &  Ohio  as  a  Gulf  line,  594. 

Strengthening  the  St.  Paul  Great  Northern  combination  by  addition  of  the  Minne- 
apolis, St.  Paul  &  Sault  Ste.  Marie  Railway,  595.— Local  traflic,  lumber  and  coal 
business  might  help,  596.— Two  iron-ore  roads  added  for  financial  strength,  597.— 
Protecting  the  St.  Paul  Great  Northern  by  trackage  contract  at  Council  Bluffs,  598.— 
Terra  Haute  and  Southeaatern  merger  and  the  Indiana  line  of  the  Chicago  &  Eastern 
Illinois,  598.— Independent  access  to  St.  Louis  and  other  minor  changes,  599  — 
The  Chicago,  Rock  Island  &  Pacific  intimately  related  to  the  Southern  Pacific,  600.— 
Each  partner  contributes  elements  of  strength,  601.— Provision  of  a  line  from'  Mem- 
phis up  to  Burlington,  la.,  desirable,  602.— Certain  minor  changes  in  the  Rock 
Island,  604.— Several  mergers  of  Texas  properties  in  the  Southern  Pacific,  604  — 
What  shall  be  done  with  the  Northwestern  Pacific?  605. 

The  Atchison,  Topeka  &  Santa  Fe,  compact,  complete,  and  impregnable,  605.— 
An  entrance  to  St.  Louis  proposed,  606.— Access  to  New  Orleans  by  merger  of  the 
Gulf  Coast  Lines,  607.— Peculiar  importance  of  the  Cole-ado  &  Southern  system,  607.— 
Choice  between  the  Santa  Fe  and  the  Southern  Pacific- Rock  Island,  608.— Serious 
disadvantages  of  Santa  Fe  merger,  609.— Rock  Island  afliliation  also  rejected,  609.— 
Made  a  neutral  through  route  in  the  Missouri  Pacific  system,  610.— Certain  minor 
Santa  Fe  changes,  610. 
Geographical  test  of  foregoing  combinations,  maps,  159. 

Statistical  verification  of  earning  power  in  terms  of  investment  account  for  proposed 
five  systems,  613. 

63I.C.C. 


474 


i 


t 


INTERSTATE  COMMERCE  COMMISSION   REPORTS. 


CHAPTER  VI. — SOUTHWESTERN-GULP   REGION. 


The  territory  bounded  and  described,  614.— Its  transportation  problems  not  prop- 
erly transcontinental,  615.— Nature  of  the  traffic,  615.— Many  small  independent 
roads,  616. — Many  of  them  precarious  financially,  616. — Statistical  data,  617. — Con- 
fusion incident  to  separate  incorporation  and  financing  of  the  Texas  properties,  617. 

National  interest  in  short  hauls  to  the  Gulf,  618.— Final  choice  for  main  stems  of 
two  local  systems,  Frisco  and  Missouri  Pacific,  respectively,  619. — Shall  they  extend 
into  Chicago?  619.— Detailed  comparison  with  southeastern  conditions,  619. — South- 
western lines  in  relation  to  primary  markets,  621. 

The  St.  Louis-San  Francisco  Railway  system  described,  621.— Its  comparative 
financial  strength,  622.— Its  operating  characteristics  improved  by  an  exchange  with 
the  Santa  Fe,  622.— Plight  of  the  Kansas  City,  Clinton  &  Springfield  Railway,  623.— 
The  Missouri,  Kansas  &  Texas  included,  623.— St.  Louis  Southwestern  divided  with 
the  Rock  Island,  624.— New  through  routes  to  the  Gulf  provided  from  St.  Louis  and 
Kansas  City,  625. — Galveston  as  well  as  New  Orleans  considered ,  626. — The  Kansas  City, 
Mexico  &  Orient  divided  at  Altus,  626.— The  Vicksburg,  ShreveportA  Pacific  admits 
into  Louisiana  territory,  626.— The  Chicago  &  Alton  for  entry  into  Chicago,  627. 

The  Missouri  Pacific  system  as  now  constituted,  628.— Its  financial  and  operating 
status,  629.— Imperative  need  of  a  direct  line  to  the  Gulf  satisfied  by  including  the 
Kansas  City  Southern,  629. — Financial  advantages  incident  thereto,  629. — New  low- 
grade  detour  via  Kansas,  Oklahoma  &  Gulf,  which  is  therefore  included,  629.— The 
Louisiana  &  Arkansas  and  the  Fort  Smith  &  Western  as  minor  additions,  630.— The 
Texarkana  &  Fort  Smith  as  well  as  other  Texas  subsidiaries  considered,  630. — Shall  the 
Omaha  line  and  the  Kansas  branch  be  left  undisturbed?  630. — And  what  about  the 
Colorado  division  into  Pueblo?  631.— Possible  dispositions  of  the  Colorado  &  Southern- 
Fort  Smith  &  Denver  City  line,  631.— Relation  to  the  Gulf  Coast  Lines,  as  allocated 
to  the  Santa  Fe,  632.— A  Chicago  entrance  provided  by  merger  of  western  line  of  the 
Chicago  &  Eastern  Illinois,  633. 

Summary  comparison  of  the  two  Southwestern-Gulf  systems  (map  26-A)  as  above 
constituted,  633.— Statistical  comparison  of  the  two  systems  as  evenly  matched 
competitors,  634. 

CHAPTER  VU. — RECAPITULATION. 

R^sum^  and  broader  aspects  of  consolidation  policy,  especially  as  respects  govern- 
ment ownership,  635.— Conspectus  of  the  plan,  proposing  21  independent  systems, 
and  comment  upon  the  summary  map  of  their  respective  locations,  636. — Their  rela- 
tive extent  and  volume  of  traffic,  638. — General  assembly  of  statistics  of  earning 
power,  with  comment  upon  r^onal  variations,  640. — Capital  account  now  compared 
with  physical  valuation,  641. — Positive  conclusions  thus  obtainable,  discussed  re- 
gionally, 643. — ^Effect  of  consolidation  upon  train  movement,  643. — And  upon  the 
welfare  of  individual  properties,  643.— Extensive  resort  to  trackage,  avoiding  need- 
less duplication,  644.— Certain  objectionable  practices  demanding  legislative  cor- 
rection, 645. — The  tendency  toward  consolidation  in  the  British  Isles  significant,  646. 

63 1. 0. 0. 


CONSOLIDATION  OF  RAILROADS. 


Introduction. 


475 


Ik' 


Text  of  the  statute  as  to  consolidation  into  systems,  475. — Other  correlative  sectiona, 
as  to  leases  and  mergers,  quot^,  475. — ^The  purpose  and  spirit  of  the  act,  476. — Its 
legislative  history,  476. — Relation  to  the  new  statutory  definition  of  reasonable 
rates,  476. — ^Three  requirements  as  to  procedure  in  consolidation,  476. — Different 
methods  of  approach,  finances,  traffic,  and  operation,  477. — Broad  outlines  tested 
by  details  for  practicability,  478.— The  employment  of  statistical  data,  478.— Its 
limitations,  478.— Certain  data  for  1917  compiled  for  ready  reference,  478.— Mile- 
age comprehended,  and  the  proportion  of  short  lines  still  to  be  assigned  place,  479. 

The  test  of  competitive  abiUty,  479. — Not  size  but  more  evenly  balanced  opportu- 
nity, 479.— The  geographical  scope  of  systems,  480. — Conforming  to  the  customary 
rate-making  areas,  480. — Shall  these  regional  boundaries  be  rigidly  or  loosely 
drawn?  481. — Is  corporate  dismemberment  permissible?  481.— Definition  of 
"weak"  and  "strong"  roads,  481.— The  difficulty  incident  to  aflinity  between 
weak  roads,  481. — Financial  reorganization  as  a  prerequisite  to  consolida- 
tion, 482. — Constitutionality  of  the  new  legislation  conferring  administrative  in 
place  of  judicial  control  over  corporate  relationships  taken  for  granted,  482. — Uni- 
fication of  terminals  also  a  prerequisite,  483. — Relation  of  consolidation  to  alternate 
routes  and  gateways,  484. — Broader  aspects  of  a  comprehensive  national 
policy,  484. 

The  transportation  act  of  1920  deals  with  the  consolidation  of  railways  into  systems 
by  the  amendment  of  section  5,  paragraph  (4)  of  the  act  to  r^^ulate  commerce,  of  1887, 
making  it  read  as  follows: 

The  Commission  shall  as  soon  as  practicable  prepare  and  adopt  a  plan  for  the  consolidation  of  the  railway 
properties  of  the  continental  United  States  into  a  limited  number  of  systems.  In  the  division  of  such 
railways  into  such  systems  under  such  plan  competition  shall  be  preserved  as  fully  as  possible  and  wherever 
practicable  the  existing  routes  and  channels  of  trade  and  commerce  shall  be  maintained.  Subject  to  the 
foregoing  requirements,  the  several  systems  shall  be  so  arranged  that  the  cost  of  transiwrtation  as  between 
comi)etitive  systems  and  as  related  to  the  values  of  the  proi)erties  through  which  the  service  is  rendered 
shall  be  the  same,  so  far  as  practicable,  so  that  these  systems  can  employ  uniform  rates  in  the  movement 
of  competitive  traffic  and  under  efficient  management  earn  substantially  the  same  rate  of  return  upon  the 
value  of  their  respective  railway  properties. 

The  act  to  regulate  commerce,  of  1887,  is  further  amended  as  to  procedure  in  effecting 
consolidation  by  the  following  paragraphs  of  section  5: 

When  the  Commission  has  agreed  upon  a  tentative  plan  it  shall  give  the  same  due  publicity  and  upon 
reasonable  notice,  including  notice  to  the  Governor  of  each  State,  shall  hear  all  persons  who  may  file  or 
present  objections  thereto.  The  Commission  is  authorized  to  prescribe  a  procedure  for  such  hearings 
and  to  fix  a  time  for  bringing  them  to  a  close.  A  fter  the  hearings  are  at  an  end  the  Commission  shall  adopt 
a  plan  for  such  consolidation  and  publish  the  same;  but  it  may  at  any  time  thereafter,  upon  its  own  motion 
or  upon  application,  reopen  the  subject  for  such  changes  or  modifications  as  in  its  judgment  will  promote 
the  public  interest.    The  consolidations  herein  provided  for  shall  be  in  harmony  with  such  plan. 

It  shall  be  lawful  for  two  or  more  earners  by  railroad,  subject  to  this  Act,  to  consolidate  their  properties 
or  any  part  thereof,  into  one  corporation  for  the  ownership,  management,  and  operation  of  the  properties 
theretofore  in  separate  ownership,  management,  and  operation,  under  the  following  conditions: 

(a)  The  proposed  consolidation  must  be  in  harmony  with  and  in  furtherance  of  the  complete  plan  of 
consolidation  mentioned  in  paragraph  (5)  and  must  be  approved  by  the  Commission. 

(b)  The  bonds  at  par  of  the  corporation  which  is  to  become  the  owner  of  the  consolidated  properties, 
together  with  the  outstanding  capital  stock  at  par  of  such  corporation,  shall  not  exceed  the  value  of  the 
consolidated  properties  as  determined  by  the  Commission.  The  value  of  the  properties  sought  to  be  con- 
solidated shall  be  ascertained  by  the  Commission  under  section  19a  of  this  Act,  and  it  shall  be  the  duty 
of  the  Commission  to  proceed  immediately  to  the  ascertainment  of  such  value  for  the  properties  involved 
in  a  proposed  consolidation  upon  the  filing  of  the  application  for  such  consolidation. 

(c)  Whejiever  two  or  more  carriers  propose  a  consolidation  under  this  section  they  shall  present  their 
application  therefor  to  the  Commission,  and  thereupon  the  Commission  shall  notify  the  Governor  of  each 
State  in  which  any  part  of  the  properties  sought  to  be  consolidated  is  situated  and  the  carriers  involved  in 

63 1.  C.  C. 


'\ 


476 


INTERSTATE   COMMERCE   (.'OMMISSTON    REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


477 


"IB^Im   r 


\ 


the  iwoposed  consolidation  of  the  time  and  place  for  a  public  hearing.  If  after  such  hearing  the  Commission 
finds  that  the  public  interest  will  be  promoted  by  the  consolidation  and  that  the  conditions  of  this  section 
have  been  and  will  Ixj  fulfilled,  it  may  enter  an  order  approving  and  authorizmg  such  consoUdation,  with 
such  modifications  and  upon  such  terms  and  conditions  as  it  may  prescribe,  and  thereupon  such  consolida- 
tion may  be  elTected,  in  accordance  with  such  order,  if  all  the  earners  involved  assent  thereto,  the  law  of 
any  State  or  the  decision  or  order  of  any  State  authority  to  the  contrary  notwithstanding. 

The  spirit  and  intent  of  this  legislation,  as  well  as  the  manner  in  which  it  was  antici- 
pated that  its  ends  would  be  attained,  are  significant.  The  sections  above  cited  do 
not  stand  alone.  They  are  integrally  related  to  section  15a,  paragraph  (2),  of  the 
act  to  regulate  commerce,  as  amended,  which  prescribes  a  new  statutory  rule  of  rate- 
making.    The  statute  reads  as  follows: 

In  the  exercise  of  its  power  to  prescribe  just  and  reasonable  rates  the  Commission  shall  initiate,  modify, 
establish,  or  adjust  such  rates  so  that  carriers  as  a  whole  (or  as  a  whole  in  each  of  such  rate  groups  or  territories 
as  the  Commission  mayfram  time  to  time  designate)  will,  under  honest,  efficient,  and  economical  management 
and  reasonable  expenditures  for  maintenance  of  way,  structures  and  equipment,  earn  an  aggr^ate  annual 
net  railway  operating  income  equal,  as  nearly  as  may  be,  to  a  fair  return  upon  the  aggregate  value  of  the 
railway  property  of  such  carriers  held  for  and  used  in  the  service  of  transportation.    [Italics  mine.] 

This  new  rule  seeks  to  fix  rates,  not  for  any  single  carrier,  but  for  the  carriers  by  nat- 
ural groups.  By  far  the  larger  proportion  of  the  traffic  of  the  United  States  is  carried 
by  so-called  strong  or  prosperous  roads.  But  it  is  equally  true  that  a  large  amount  of 
mileage  is  in  the  hands  of  corporations  which,  in  a  financial  sense,  may  be  denominated 
chronically  weak.  The  causes  for  such  weakness  are  various,  including  disadvan- 
tageous location,  unwise  investment  or  administration,  an  unwieldy  financial  struc- 
ture, or  even  downright  impairmant  of  capital  by  waste  or  fraud.  But,  regardless 
of  the  sources  of  this  disability,  these  weak  lines  are  as  essential  to  the  welfare  of  the 
conmiunities  which  they  serve  as  are  the  strong  lines  to  their  patrons.  1 1  is  the  theory 
of  this  legislation  that  the  railways  must  be  considered  as  a  whole,  group  by  group, 
fixing  by  means  of  the  new  statutory  rule  of  rate  making,  a  general  level  of  return 
adequate  to  maintain  them  all  at  a  proper  pitch  of  efficiency.  The  difficulty  in  the 
past,  as  stated  by  Senator  Cummins  on  December  2,  1919,  in  Congress,  is  that  "It 
has  been  utterly  impossible  for  any  body  of  men  to  make  a  system  of  rates  that  will 
sustain  the  weaker  railroads  of  the  country  without  gi\ing  to  the  stronger  railroads 
an  income  excessive  and  intolerable  in  its  extent;  and  there  lies  the  great  funda- 
mental obstacle  in  our  system  of  rate  making.  *  *  *  It  was  obvious,  I  thinkj 
to  the  students  of  the  subject,  long  before  the  government  took  possession,  that  we 
must  adopt  some  plan  that  would  remove  this  inherent  fundamental  difficulty." 
The  section  of  the  act  dealing  with  consolidation  into  systems,  above  cited,  was  in- 
tended to  supplement  the  new  sections  dealing  with  statutory  definition  of  reasonable 
rates,  in  coping  with  this  difficulty. 

To  this  end,  the  Senate  bill  sought  to  reduce  the  carrier  corporations  to  a  common 
denominator  of  earning  power  in  terms  of  valuation  by  compulsory  consolidation. 
It  was  intended  to  compel  the  stronger  roads  to  merge  their  identity  with  the  weaker 
ones  for  the  common  good  of  the  country  as  a  whole.  But  the  measure  ultimately 
emerged  from  conference  committee  with  the  procedure  as  above  described,  in  place 
of  compulsion.  It  was  evidently  expected  that  the  new  statutory  rule  of  rate  making 
would  afford  an  incentive  sufficiently  powerful  to  induce  the  strong  companies  to^ 
merge  with  weaker  ones,  rather  than  to  be  compelled  to  pay  over  their  surplus  earn- 
ings above  the  rate  of  return  fixed  as  reasonable,  into  a  revolving  fund  for  the  general 
benefit  of  their  respective  groups.  An  incentive  to  the  weaker  roads  might  also  con- 
ceivably obtain.  The  aid  extended  by  the  act  from  the  surplus  earnings  of  the  strong 
roads  consists  merely  of  advances  or  loans,  except  in  so  far  as  a  better  balanced  oppor- 
tunity yields  larger  earnings.  Or  else  x>088ibly  a  fairer  administration  of  the  division 
of  through  rates  may  help.  But  the  weaker  roads  are  encouraged  to  seek  shelter 
through  affiliation.    They  are  not  taken  care  of  by  any  definite  guaranty  of  earnings. 

63 1.  C.  C. 


But  the  motive  for  consolidation,  it  was  held,  should  not  be  permitted  to  bring  about 
indiscriminate  mergers,  regardless  of  natural  relationships  of  the  carriers  either  to  one 
another,  or  to  the  needs  of  their  respective  territories.  It  was  in  order  that  there  might 
be  consonance  between  such  mergers  as  took  place  and  the  public  welfare,  rather  than 
that  mere  immediate  profit  to  those  concerned  might  result,  that  the  formal  pro- 
cedure as  above  described  was  enacted  into  law.  Not  otherwise,  thus,  than  in  its 
direct  relationship  to  the  fundamental  principle  of  the  new  act  can  the  significance  of 
the  particular  consolidation  provisions  be  understood.  And  it  is  because  of  this 
causal  relationship  that  the  act  further  prescribes  that  no  mergers  which  are  not  in 
accordance  with  this  plan,  as  thus  adopted,  may  lawfully  take  place. 

As  to  procedure  in  undertaking  this  investigation,  the  leading  paragraph  of  the 
statute,  dealing  with  consolidation,  above  quoted,  contains  three  requirements  which 
must  be  observed.  The  first  is  that  competition,  presumably  in  service,  shall  be 
preserved;  the  second  is  that  existing  routes  and  channels  of  commerce  shall  not  be 
"disturbed;  and  the  third,  subject  it  will  be  noted,  to  the  foregoing  requirements,  is  that 
the  financial  aspects  of  such  mergers  shall  be  kept  in  view.  Without  having  regard  to 
the  fundamental  principle  involved,  both  in  consolidation  and  the  new  statutory 
rule  of  rate  making,  it  might  appear  that  these  several  requirements  were  stated  in  the 
order  of  their  importance;  in  other  words,  that  the  element  of  financial  strength  was 
less  significant  than  the  preservation  of  competition  and  of  the  existing  traffic  routes. 
But  hiving  due  regard  to  the  matter  in  its  larger  practical  aspects,  it  is  evident  that 
any  plan  adopted  will  not  only  be  a  mere  paper  plan,  ineffectual  and  futile,  but  that 
it  will  fail  to  conform  to  the  spirit  of  the  act,  unless  the  financial  requirements  be 
given  equal  weight  with  those  of  operation  and  traffic.  For  the  plan  will  never  be 
put  into  effect  unless  a  financial  motive  for  consolidation  be  afforded;  and  unless  it  is 
put  into  effect,  a  positive  bar  to  the  attainment  of  uniform  reasonable  rates,  under 
which  all  the  carriers  alike  may  thrive,  will  continue  to  exist,  if  the  underlying 
principle  of  the  legislation  is  in  reality  sound. 

Assuming  the  thre*  requirements  for  consolidation  to  be  of  equal  importance,  two 
quite  distinct  methods  of  approach  might  be  adopted  according  as  one  began  at  the 
operating  and  traffic  end,  or,  on  the  other  hand,  began  with  the  financial  aspects  of 
the  matter.  Under  normal  conditions  these  two  methods  seemingly  promise  results 
of  equal  value.  One  might,  presumably,  first  ascertain  the  relative  financial  standing 
of  the  corporations;  and  thereafter  check  up  the  alliances  thua  indicated,  by  applying 
the  test  of  operating  efficiency  and  satisfaction  of  the  traffic  needs  of  the  territories 
concerned.  Or,  contrariwise,  one  might  first  seek  the  natural  alignment  of  these 
properties  as  operating  and  traffic  units,  before  inquiry  as  to  whether  such  alignment 
contained  an  effective  invitation  to  merger,  based  ujwn  considerations  of  earning 
power  and  financial  stability.  The  former  method  appeals  particularly  to  financial 
students  of  the  subject.  It  has  resulted  in  the  formulation  of  several  significant  pro- 
posals. The  latter  calls  for  a  somewhat  wider  range  of  information,  dealing  not  alone, 
as  it  does,  with  the  operating  and  traffic  characteristics  of  the  carrier  companies,  but 
also  looking  to  the  broader  considerations  of  the  traffic  needs  of  the  entire  communities 
served.  For  it  is  held  that  the  maintenance  of  the  "existing  routes  and  channels  of 
trade  and  conmierce"  implies  not  the  preservation  of  merely  artificial  currents  and 
conditions,  but  that  the  statute  contains  an  invitation  to  consider  these  carrier  cor- 
porations in  their  basic  relationship  to  the  welfare,  present  and  prospective,  of  the 
country.  Viewed  in  this  larger  sense  the  act  is  at  once  an  invitation  and  an  oppor- 
tunity. It  calls  for  an  analysis  of  the  commercial  geography  of  the  United  States,  in 
its  relation  to  the  layout  of  its  railway  net.  For,  unless  the  location  of  its  railways 
conforms  to  the  commercial  requirements  of  the  country,  there  can  be  no  permanent 
prosperity  for  either.  The  further  requirement  in  the  act  for  a  certificate  of  public 
exigency  for  proposed  new  construction  of  railways  is  but  another  expression  of  this 
intent  in  the  law. 

63 1.  G.  C. 


478 


INTERSTATE  COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


479 


! 


I 


As  to  procedure,  also,  it  has  been  represented  stoutly  that  this  plan  should  confine 
itself  strictly  to  broad  outlines;  and  even,  perhaps,  merely  propose  but  a  statement 
of  principles.  It  is  contended  that  useless  complications  and  prejudice  to  future 
negotiations,  as  well  as  a  dangerous  effect  upon  market  values,  may  result  from  descent 
into  detail.  Fully  conceding  the  force  of  this  reasoning,  experience  demonstrates  that 
general  principles  and  broad  outlines  may  only  be  tested,  as  to  their  feasibility,  by 
tentative  elaboration  of  the  finer  points.  Only  thus  are  the  thousand  and  one  com- 
plications rendered  appreciable  to  the  naked  eye.  In  brief,  general  principles  and 
broad  treatment  require  the  test  of  practicability.  If,  therefore,'  it  appears  at  times 
that  these  proposals  descend  imduly  into  the  intricacies  of  corporate  relationship,  it 
should  be  borne  in  mind  that  the  purpose  is  not  so  much  to  reach  a  final  judgment, 
as  it  is  to  reveal  the  various  considerations  upon  the  basis  of  which  such  final  decision 
may  at  some  time  perha|)s  have  to  be  rendered. 

Certain  statistical  data  have  been  compiled  and  are  incorporated  in  this  text,  as 
well  as  appended  as  exhibits,  in  order  to  check  up  the  plan,  as  proposed,  by  territories 
and  by  systems,  respectively.  The  calendar  year  1917  has  been  chosen  for  the  pur- 
pose, largely  because  the  results  for  that  period  most  closely  approximate  the  standard 
requirement  established  by  the  statute  of  an  operating  income  amounting  to  5.5  per 
cent  of  the  investment  in  road  and  equipment.  For  1917,  the  actual  rate  of  return 
was  in  fact  5.45  per  cent.  The  tables  and  exhibits,  as  prepared  by  the  bureau  of 
statistics  of  the  Interstate  Commerce  Conmiission,  are  necessarily  confined  to  a  few 
pertinent  items.  Among  these  are  investment  in  road  and  equipment,  total  and  per 
mile  of  line ;  revenue  ton-miles ;  revenue  per  ton-mile ;  and  railway  operating  revenue , 
total  and  per  mile  of  line;  net  operating  income,  total  and  per  mile  of  Une;  mileage 
operated ;  and  percentage  of  net  operating  income  on  investment  in  road  and  equip- 
ment. It  should  be  noted  that  the  net  operating  income,  however,  is  not  that  of  the 
calendar  year  1917,  but  is  based  upon  the  standard  return — that  is  to  say,  the  average 
annual  net  railway  operating  income  for  the  three  years  ended  June  30,  1917.  The 
reason  for  using  the  average  income  (standard  return)  for  the  three  years  for  purposes 
of  comparison  with  the  property  investment  as  of  December  31,  1917,  is  that  this 
figure  was  provided  by  Congress  as  the  fair  rental  (subject  to  correction)  for  the  prop- 
erty actually  taken  over  at  the  close  of  1917.  This  standard  retiun  for  some  roads  in 
process  of  rapid  development  is  considerably  less  than  the  actual  income  of  the  cal- 
endar year  1917.  But  for  other  roads  the  standard  return  will  be  found  to  exceed  the 
1917  income.  The  net  result  is  that  for  class-I  roads  as  a  whole,  the  1917  income 
exceeds  the  standard  return  by  about  7.5  per  cent.  Thus  it  appears  that  for  a  few 
roads,  perhaps  imdergoing  rapid  development,  the  standard  return  imderstates  the 
case;  but  for  all  of  the  rest,  the  three-year  average  affords  a  safer  basis  than  the  results 
of  any  single  year. 

The  foregoing  data  for  class-I  roads,  including  their  subsidiaries,  as  segregated  by 
systems  set  up  under  this  plan,  afford  a  rough  indication  of  the  competitive  strength, 
geographical  scope,  and  inherent  financial  stability  of  the  relationships  proposed. 
But  it  is  evident  that  such  data  constitute  merely  a  rough  check  upon  the  plan.  The 
figures  are  no  more  to  be  trusted  implicitly  than  are  seductive  maps  nicely  fashioned 
to  produce  the  effect  of  symmetry  upon  paper.  Such  symmetry,  until  it  be  checked 
up  and  tested  in  detail  for  all  manner  of  traffic  and  operating  conditions,  may  be 
grossly  misleading.  Statistics,  as  well  as  maps,  imder  these  given  circumstances 
must  be  regarded  and  treated  as  imperfect  criteria.  The  realignment  of  properties, 
with  the  consequent  disturbance  of  all  traffic,  is  bound  to  be  instantly  reflected  in 
earning  power.  The  putting  together  or  dismemberment  of  individual  properties 
may  bring  about  results  which  are  quite  unpredictable  by  the  arbitrary  means  of 
statistical  investigation.  Elaborate  calculations  by  experts  concerning  the  develop- 
ment of  business  under  the  new  conditions  are  really  necessary  in  order  to  afford  a 

63  I.  C.  C. 


reliable  forecast.  Not  published  statistics,  but  rather  an  intimate  acquaintance  with 
local  traffic  conditions  afford  the  only  entirely  reliable  data.  Yet  inasmuch  as  these 
data  are  the  .best  we  have,  they  are  analyzed  and  published  for  what  they  are  worth. 

This  consolidation  plan,  it  should  be  noted,  has  thus  far  been  concerned  only  with 
class-I  roads;  that  is  to  say,  roads  having  an  operating  revenue  in  excess  of  $1,000,000. 
The  aggregate  mileage  of  these  class-I  roads  herein  consolidated  in  1917  was  220,000 
miles.  There  thus  remains  the  not  inconsiderable  aggregate  of  39,000  miles  of  line, 
consisting  of  the  so-called  short  lines,  the  remaining  class-I  roads,  and  those  within 
classes  II  and  III.  That  the  number  of  these  is  quite  large  is  evident  from  inspection 
of  section  C  of  the  Annual  Report  on  the  Statistics  of  Railways  for  1917,  pages  469  et 
seq.  No  attempt  has  been  made  to  trace  the  natural  relationships  of  these  minor  prop- 
erties, and  probably  it  is  not  necessary  at  this  time.  But  the  fact  of  their  existence  and 
of,  in  many  cases,  their  grave  necessities  may  not  be  ignored.  A  comprehensive  plan 
of  railroad  consolidation  would  include  their  allocation  in  due  course;  but  the  dat^ 
are  not  at  present  available.  The  case  of  the  Illinois  Traction  Company,  with  its 
widespread  interstate  ramifications  is  typical  of  a  number  of  other  electric  public 
utilities.  No  attempt  is  made  to  assign  them  in  this  tentative  plan,  which  confines 
its  attention  solely  to  the  larger  steam  roads. 

As  for  the  troublesome  problem  of  allocation  or  abandonment  of  certain  properties 
not  serviceable  to  their  respective  communities,  the  matter  is  discussed  in  chapter  VI. 
For  it  is  in  the  southwestern  states  that  the  question  presents  itself  in  the  most  acute 
form.  »i       I 


What  test  shall  be  applied  in  order  to  ascertain  competitive  ability;  that  is  to  say, 
ability  to  prosper  reasonably  along  with  other  railroads  in  the  same  group  under  a 
uniform  set  of  rates?  Do  the  requirements  of  the  statute  call  for  the  creation  of 
systems  of  substantially  equal  mileage  or  enjoying  much  the  same  volume  of  gross 
earnings  or  net  income  from  operation?  Shall  one  seek  to  construct  comprehensive 
groups  conforming  to  one  or  several  of  these  standards,  or  may  one  assume  that  size, 
as  thus  indicated,  is  merely  of  secondary  importance?  It  has  been  urged  with  some 
cogency  that  this  plan  does  not  call  for  wide-spread  disturbance  of  existing  relation- 
ships except  to  take  care  of  the  properties  that  are  either  well  above  par  or  substan- 
tially below  it.  In  other  words,  it  has  been  urged  on  behalf  of  several  properties  of 
moderate  size  that  they  are  already  doing  fairly  well  under  the  statute,  conforming 
to  the  requirements  and  enjoying  the  reasonable  return  fixed  by  the  Commission 
without  further  alliance  with  other  companies.  One  has  to  decide  as  to  such  claims, 
and  particularly  must  one  decide  where  to  draw  the  line  in  the  search  for  uniformity 
in  magnitude.  Deciding  roughly,  as  one  must  under  existing  conditions,  it  is  held 
to  be  more  important  to  create  self-sustaining  systems  as  to  earnings  derived  from  as 
large  a  proportion  as  possible  of  the  area  of  the  several  great  subdivisions  of  the 
country,  rather  than  to  attempt  to  put  these  properties  together  in  such  an  exact  way 
that  they  shaU  all  have  approximately  equal  mileage  or  equal  gross  or  net  earnings 
within  each  group.  Neither  mileage  nor  volume  of  business  is  the  real  test  of  ability 
to  exist  under  the  statute.  In  brief,  as  illustrated  by  trunk  line  territory,  it  is  held 
that  a  Baltimore  &  Ohio  system  adequate  to  satisfy  the  requirements  of  the  statute 
may  be  created  by  giving  it  a  mileage  or  a  gross  volume  of  traffic  by  no  means  com- 
mensurate with  either  the  New  York  Central  or  the  Pennsylvania.  Its  ability  to 
serve  may  perhaps  be  dependent  upon  quite  other  considerations  than  those  of  size. 
If  quality  can  be  conferred  by  means  of  better  developed  traffic  relationships,  and  if 
natural  alignment  and  relationship  can  be  adhered  to,  it  is  believed  that  the  situation 
so  far  as  the  act  is  concerned  will  be  satisfactorily  met. 

The  dynamic  aspect  of  consolidation  must  also  be  kept  in  mind.  The  purpose 
being  to  promote  a  more  evenly  balanced  competition,  especially  by  means  of  equal- 
izatio|i  Qf  opportunity  in  originating  traffic  as  well  as  in  its  interchange  and  delivery, 

63  L  a  0. 


1 


;\ 


^1 


If 


480 


INTEBSTATE  COMMEBCE  COMMISSIOK  BEPOBTS. 


00V80UDATI0N  OF  BAILROADS. 


481 


it  is  conceivable  that  congestion  may  be  in  a  measure  relieved  by  this  i)lan.  The 
growth  of  business  in  future  years  must  accrue  largely  to  the  existing  stem?.  Soun<i 
public  policy  demands  that  this  growth  should  be  so  db^tributed  a<  to  avoid  blockades 
and  embargoes  on  the  strong  road^,  while  the  weak  ones  are  coincideutly  drifting 
toward  starvation.  To  insure  a  larger  proportion  of  the  increment  to  the  weaker 
roads,  by  rendering  them  more  ca])able  of  efficient  service,  i-*  the  idea.  The  jmrpo.-.e 
of  the  legislation  being  not  U)  guarantee  an  income  l)ut  to  afford  an  equality  of 
opportunity  to  earn  it,  was  intended  to  be  promoted  by  thi^  mean-*. 

Fundamental  differences  l>etween  various  plans  proposed  for  consolidati'Mi  ari>e 
concerning  the  size  and  scope  of  the  mergers.  Shall  they  be  continental  in  ransje. 
reaching,  that  is  to  say,  clear  across  the  country,  from  east  to  west,  and  from  (  ana^ia 
to  the  Gulf;  or  shall  they  conform  to  territorial  divisions  of  the  rountry?  ('oa-^idera- 
tions  of  operating  efl&ciency  and  of  conformity  to  the  traffic;  needs  of  the  country,  as 
well  as  preservation  of  competition  and  of  the  established  channels  of  trade  and 
commerce,  are  not  sufficient.  It  is  essential  also  that  administrati^'e  organization 
both  within  the  company  and  in  its  relations  to  the  government  should  be  likewise 
comprehended.  Particularly  is  it  important  that  corresiwndence  be  maintained 
between  the  scope  of  these  railroad  systems  and  the  long-standing  rate-making  areas 
and  statistical  divisions  which  have  commended  themselves  upon  the  basis  of  long 
experience  to  the  parties  concerned.  All  of  these  considerations  join  in  commending 
a  divisiim  of  the  country  for  purposes  of  consolidation  primarily  into  the  great  sub- 
divisions of  trunk  line  territory;  8<iutheastern  territory,  that  is  to  say,  south  of  the 
Potomac  and  Ohio  rivers  and  east  of  the  Mississippi;  and  western  territory,  lying 
beyond  the  Mississippi.  Furthermore,  local  peculiarities  and  the  marked  individ- 
uality of  certain  areas  seem  to  make  it  desirable  Ui  set  off  certain  suMistricts  within 
these  great  primary  divisions.  Thus  New  England  and  Chesapeake  Bay  or  Hampton 
Roads  territory,  and  a  sector  between  St.  Louis- Kansas  City  and  the  (iulf  are  set  *u'i 
by  themselves  and  separately  discussed.  Such  a  general  division  of  the  territon*^  ct 
the  United  States  conforms  practically  to  the  widest  range  thius  far  covered  by  any 
existing  railroads  or  systems.  Ambitious  plans,  notably  that  of  the  Gould  sy.-tem 
after  1901,  and  of  the  Farquhar  syndicate,  somewhat  later,  have  sought  in  vain  to 
constitute  tenuous  systems  covering  a  wider  territory  than  these  hist<jric  area-^.  But 
their  weakness  from  every  point  of  view  has  been  amply  demonstratetl.  Any  sul>- 
stantial  system  must  have  breadth  as  well  as  length,  an  amplitude  of  feeders  as  well 
as  main  stems;  and  there  seems  withal  to  be  a  pretty  clearly  defined  upper  limit  of 
the  aggregate  mileage  which  may  be  efficiently  operated.  This  limit  of  mileage  will, 
of  course,  var>'  widely  with  the  density  of  traffic  and  the  details  of  operation.  But. 
viewing  the  matter  broadly,  it  seems  not  unlikely  that  any  system  ranging  far  and 
wide  beyond  the  natural  territorial  divisions  above  described  will  either  be  la(  king 
in  breadth  and  stability  of  Wation,  or  will  exceed  the  ability  of  a  An^\6  management 
efficiently  to  handle.  The  experience  of  the  federal  Railroad  Administration  in 
dividing  up  the  area  of  the  country  seems  to  confirm  this  view,  that  for  operating 
and  traffic  purposes  each  system  should  be  comprehended  within  the  certain  great 
territories  above  named. 

The  new  statutory  rule  of  rate  making  and  the  first  decision  rendered  thereunder 
by  the  Interstate  Commerce  Commiasion — Ex  Parte  74 — also  render  it  imperative  in 
planning  for  comprehensive  consolidation  not  to  transgress  the  boundaries  of  these 
traditional  territorial  subdivisions.  The  purpose  of  the  law  being  to  fix  reasonable 
rates,  not  for  individual  railroads  but  for  entire  groups,  renders  it  essential  that  the 
grouping  adopted  for  this  purpose  conform  to  that  which  is  adopted  in  effecting  the 
consolidations.  Otherwise  confusion  in  the  administration  of  the  new  law  would  be 
bound  to  result. 

68Laa 


Having  adopted  a  subdivision  of  the  country  into  certain  great  territorial  districts 
for  purposes  of  consolidation,  how  important  is  it  that  each  system  shall  be  rigidly 
confined  within  its  own  particular  territory?    In  other  words,  are  these  boundaries  to 
be  strictly  or  loosely  applied  to  the  consolidations  which  are  proposed?    The  desira- 
bility is  obvious  of  disturbing  or  disrupting  existing  corporations  and  relationships  as 
little  as  possible;  and  yet  consideration  of  the  map  indicates  not  infrequently  that 
so-called  trunk  lines  extend  west  of  the  Mississippi;  that  western  railroads  and  southern 
companies  penetrate  one  another's  areas  in  order  to  reach  strategic  points;  or  that  the 
southern  lines  have  in  the  past  found  it  desirable  to  extend  northward  across  trunk 
line  territory  to  Chicago.    What  shall  be  done  with  these  odd  bits  and  loose  ends? 
Shall  the  Kansas  City,  Memphis  &  Birmingham,  for  example,  be  treated  as  an  integral 
part  of  the  southeastern  systems,  because  it  lies  east  of  the  Mississippi,  although  it  is 
really  a  western  railroad?    Or  shall  the  Illinois  Central  continue  to  reach  the  Afissouri 
River  at  Omaha?    The  most  difficult  problem  in  this  connection,  fortunately  confined 
to  a  single  system,  is  to  decide  what  to  do  with  the  Wabash.    This  property  alone 
bridges  two  great  and  entirely  distinct  traffic  areas,  east  and  west  of  the  Mississippi. 
Standing  alone  as  a  system  in  this  regard,  it  may  more  fittingly  be  discussed  elsewhere . 
But  as  to  the  loose  ends  of  other  systems  which  lie  beyond  their  o^vn  appropriate  terri- 
tories, an  attempt  has  been  made  to  find  for  them,  so  far  as  may  be,  a  natural  align- 
ment with  the  other  properties  within  each  of  the  great  territorial  subdivisions.    It  is 
believed  that  by  such  treatment  a  greater  ease  of  administration  of  the  law  will  be  in 
the  future  provided .    But  precision  must  at  all  times  be  tempered  by  practicability; 
and,  as  in  the  limitation  of  rate  areas  or  classification  territory,  an  occasional  lapse 
from  system  is  deemed  preferable  to  corporate  or  traffic  dismemberment. 

The  preparation  of  a  comprehensive  consolidation  plan  necessarily  upon  occasion 
involves  a  disruption  as  well  as  a  putting  together  of  relationships  for  other  purposes 
also  than  the  one  above  mentioned.  Obviously,  such  dismemberment  should  be 
rigidly  minimized;  and  no  proposal  for  so  doing  is  made  unless  the  evidence  in  its 
favor  is  most  convincing.  Were  the  plan  in  effect  a  final  one  involving  large  financial 
considerations,  one  might  hesitate  even  under  these  circumstances.  But  having  in 
mind  that  these  proposals  are  purely  tentative,  that  they  are  the  preparation  of  a 
sketch  or  an  ideal  layout,  the  plan  assumes  the  right  to  tear  apart  as  well  as  to  con- 
solidate; in  other  words,  to  effect  where  necessary  a  comprehensive  readjustment. 
The  financial  means  to  be  adopted  under  these  circumstances  lie  beyond  the  scope 
of  this  plan;  but  occasionally,  as  in  chapter  V  concerning  the  dissolution  agreement 
between  the  Central  Pacific  and  the  Southern  Pacific  Company,  a  concrete  illustration 
of  the  entire  feasibility  of  unmerger,  even  in  the  face  of  an  extreme  financial  and 
corporate  entanglement,  is  afforded. 

This  tentative  plan  for  consolidation  proceeds  upon  the  assumption  that  the  dis- 
tinction between  so-called  weak  and  strong  roads,  financially,  is  at  present  highly 
uncertain;  and  that  it  will  require  a  period  of  experience  under  the  new  rates  and  under 
the  new  division  of  through  rates  as  Well  as  under  the  slowly  readjusted  commercial 
and  industrial  conditions  after  the  war,  in  order  to  establish  the  relative  earning  power 
and  credit  of  each.  A  period  of  trial  is  often  necessary,  both  to  reveal  elements  of 
strength  and  of  weakness.  Substantial  equilibrium  seems  unlikely  to  be  attained 
for  a  considerable  period  of  time.  Yet  in  the  meanwhile,  tentative  plans  must  be 
set  up,  in  preparation  for  the  application  of  the  final  test  of  relative  financial  strength 
as  soon  as  the  available  data  make  this  possible.  Not  infrequently  it  will  be  found 
that  in  these  plans  it  has  been  necessary  to  put  together  what  appears  to  be  a  dispro- 
portionate number  of  weak  roads,  or  at  all  events,  of  roads  which  have  yet  to  establish 
their  claim  to  entire  stability.  Particularly  has  this  been  the  case  in  the  so-called 
Gulf  region,  where  practically  all  of  the  properties  seem  to  be  below  par.  No  strong 
roads  exist  with  which  these  may  be  consolidated,  without  extension  of  the  scope  of 
•8  I.  C.  C. 


482 


INTEBSTATE  COMMERCE  COMMISSION  BEPORTS. 


CONSOLIDATION   OF   RAILROADS. 


483 


1^ 


conaoUdation  far  beyond  the  bounds  which  are  apparently  laid  down  by  traffic  and 
operatin.T  experience.    The  same  condition  would  obtain  under  the  so-called  New 
Ei^land°plan  for  that  particular  territory,  as  well  as  for  the  peninsula  of  Michigan. 
r'The  assumption  is  thus  made  that  the  purpose  of  this  act  being  to  rehabiUtate  the 
/    carriers  through  a  new  definition  of  reasonable  rates,  these  entire  groups  of  roads  may 
be  expected  to  prosper,  to  a  degree  as  yet  not  ascertained,  but  none  the  less  to  a  sub- 
l     stantial  amount.    Whether  this  rehabiUtation  will  ultimately  warrant  the  grouping 
N   herein  tentatively  proposed,  the  future  alone  can  decide.    But  necessarily  the  first 
step  must  be  to  provide  for  proper  grouping  in  order  to  promote  the  best  operating  and 
traffic  results.    The  responsibility  for  the  subsequent  financial  success  of  the  under- 
takings must  then  rest  upon  the  exercise  of  the  new  rate-making  poweis,  conferred 
upon  the  Interstate  Commerce  Commission  by  the  act. 

A  peciUiar  difficulty  in  effecting  consolidation  of  strong  with  weak  roads  and  of 
reconciling  such  merger  with  existing  operating  and  traffic  relationships,  arises  from 
the  tendency  of  the  weak  roads  to  link  up  in  series  and  to  form  thereby  through  routes 
extending  sometimes  clear  across  the  country'.    For  example,  at  Peona  a  number  of 
such  roads  meet:  The  Lake  Erie  &  Western  from  the  east,  the  Minneapolis  &  St. 
Louis  from  the  north,  and  the  Chicago,  Peoria  &  St.  Louis  from  the  south.    These 
various  properties,  together  with  the  Wabash,  the  Chicago  Great  Western,  the  Clover 
Leaf   and  the  Nickel  Plate,  tend  to  exchange  more  freely  with  one  another  than 
with'  the  standard  or  strong  lines.    From  these  strong  lines,  which  have  their  own 
routes  from  end  to  end  of  each  territory,  they  are  naturally  excluded,  so  that  they 
are  more  or  less  compelled  to  associate  with  one  another  in  the  formation  of  what 
mav  be  called  substandard  routes.    Such  routes  were  peculiariy  the  offenders  in 
the  old  days  of  rate  cutting.    Th^  present-day  bid  for  traffic  is  not  infrequently 
based  upon  peculiar  attention  to  dispatch  or  certainty  of  prompt  delivery.    This 
competition  in  service  is  naturally  expensive  and  tends  still  further  to  attenuate 
their  net  earnings.    Furthermore,  these  smaller  subnormal  properties  oftentimes 
serve  as  the  natural  arms  or  extensions  of  the  larger  companies,  which  by  reason 
of  a  paucity  of  feeders,  are  forced  to  rely  upon  such  association.    Thus  the  Erie, 
itself  in  precarious  case  financially,  will  be  found  more  often  to  have  united  with 
these  lesser  substandard  properties  to  form  ''existing  routes  and  channels  of  trade  " 
Under  such  conditions,  the  mandate  of  the  statute,  to  preserve  "as  fully  as  possible 

{and  wherever  practicable"  such  traffic  associations,  impels  one  of  necessity  toward 
consolidation  of  a  number  of  equally  substandard  roads.    Conformity  with  the  other 
mandate  of  the  statute  by  seeking  to  ally  strong  and  weak  properties  to  a  like  degree/ 
thus  threatens  to  overset  the  traffic  relationships  which  have  become  customarily 
established  by  very  force  of  circumstances.    It  is  because  of  the  clash  between  these 
at  times  discordant  requirements,  that  the  emergent  result  is  so  often  a  piebald  com- 
promise. ,'     ' 
Several  assumptions  akin  to  the  foregoing  one  are  made  in  the  foUowmg  plan.  , 
The  first  is  that  for  a  number  of  roads  a  substantial  readjustment  of  capitalization 
must  occur  as  a  prerequisite  for  consolidation.    It  is  clear  that  this  must  be  so  by 
virtue  of  the  authority  vested  in  the  Commission  under  section  5,  paragraph  6b, 
already  quoted  (page  475,  mpra).    The  purpose,  obviously,  is  to  bring  about  the  re- 
establishment  of  a  due  relationship  between  the  total  volume  of  securities  outstand- 
ing and  the  valuation  assignable  to  the  property  for  rate-making  purposes,  as  well 
as  the  assurance  of  a  sound  relationship  between  indebtedness  and  capital  stock. 
The  experience  of  a  number  of  recently  reorganized  properties  is  significant  as  in- 
dicating the  recuperative  effect  of  a  drastic  reorganization  of  capitalization.    Roads 
once  weak  have  become  strong,  not  only  capable  of  supporting  themselves  but  of 
projecting  their  vigor  into  other  properties  with  which  they  may  be  associated.    Such 
notably  seems  to  have  been  the  case  of  late  with  the  Pere  Marquette  and  also  the 

63LC.C. 


!l 


.* 


Pittsburgh  &  West  Virginia.  And  it  may  well  be  that  the  Erie  Railroad  as  well  as 
others  may  upon  such  financial  readjustment  disclose  an  actual  earning  power  which 
has  in  the  past  been  concealed  through  a  distorted  relationship  between  capitaliza- 
tion and  investment. 

It  is  likewise  presupposed  throughout  this  report  that  all  of  the  new  powers  con- 
ferred upon  the  Interstate  Commerce  Commission  by  the  transportation  act,  1920, 
will  be  upheld  constitutionally.  An  entire  transformation  in  the  relation  between 
this  administrative  branch  of  the  government  and  the  judicial  arm  has  been  brought 
about.  Sporadic  control  by  the  courts,  as  evidenced  in  the  pending  dissolution 
proceedings  concerning  the  Central  Pacific  and  Southern  Pacific  companies  and  the 
Philadelphia  &  Reading  and  Central  of  New  Jersey,  it  is  assumed  now  yield  place  to 
a  continuing  supervision  and  control  by  the  Interstate  Commerce  Commission,  act- 
ing as  a  branch  of  the  executive  authority.  Such  a  complete  reversal  of  public 
policy  must  lead  to  protracted  litigation;  but  regardless  of  the  final  outcome  no 
course  in  connection  with  this  report  is  possible  save  to  hold  that  the  will  of  Con- 
gress as  expressed  in  the  transportation  act  is  governing  and  supreme.  Not  even 
judicial  decisions  under  the  Sherman  act  or  the  commodity  clause  of  the  act  to  regu- 
late commerce  are  held  to  constitute  a  bar  to  the  free  allocation  of  these  properties 
to  the  new  systems  provided  by  this  plan.  All  of  the  roads  concerned  in  such  pro- 
ceedings are  therefore  treated  with  entire  freedom,  assuming  that  the  final  decision 
as  to  the  propriety  of  such  placement  will  rest  in  future  not  with  the  courts  but  with 
the  Interstate  Commerce  Commission. 

Another  far-reaching  assumption  is  vital  to  the  success  of  this  plan.  This  has 
to  do  with  the  operation  of  terminals  at  great  centers.  Historically,  there  has  been 
the  greatest  diversity  of  experience  in  this  regard  between  the  carriers  of  the  coun- 
try. Some  roads  are  peculiarly  fortified  as  to  terminals,  while  possessing  weak  lines 
from  an  operating  standpoint  across  the  open  country.  For  others,  the  reverse  is 
true.  Some  companies,  entering  the  field  late,  enjoy  good  locations  as  to  line,  but 
have  always  worked  under  a  handicap  at  the  terminals.  Such  lines  are  strong  in 
the  open  but  weak  at  the  ends.  Others — the  Atlanta,  Birmingham  &  Atlantic,  for 
example — were  really  constructed  across  country  rather  to  utilize  an  existent  ter- 
minal than  because  of  a  demonstrated  need  for  the  new  cross-country  line.  But 
whatever  the  cause  for  the  existing  situation,  a  practically  universal  demand  of 
shippers  is  that  they  be  able  freely  to  exercise  their  routing  rights  by  the  provision 
of  open  terminals,  both  at  the  point  of  shipment  and  at  destination.  The  right  of 
route  across  country  is  impaired  if  the  only  possible  delivery  is  at  an  inconvenient 
point.  To  put  together  railway  lines  on  the  map  without  having  a  constant  regard 
to  the  possibility  of  free  delivery  or  receipt  at  either  end  would  indeed  be  futile.  As 
to  the  particular  means  for  accomplishment  of  this  object — ^free  and  untrammeled 
utilization  of  terminals — there  may  well  be  difference  of  opinion.  Conceivably, 
joint  ownership  and  operation,  as  at  St.  Louis,  may  succeed  in  that  environment, 
while  reciprocal  switching  may  satisfactorily  answer  the  purpose  as  at  Chicago.  But, 
whatever  the  means  adopted  to  this  end,  it  is  submitted  that  a  proper  adjustment 
of  the  various  terminal  situations,  always  of  course  for  due  compensation,  is  an  im- 
portant adjunct  to  any  comprehensive  consolidation  plan.  No  recommendation, 
therefore,  as  to  particular  terminal  remedies  is  offered  in  this  report.  The  subject 
technically  is  so  involved,  that  it  might  well  be  made  matter  for  a  special  investi- 
gation. Its  bearing  upon  and  relation  to  the  subject  of  the  division  of  through  rates 
is  as  obvious  as  is  its  intimate  connection  with  consolidation.  The  pending  New 
York  Cential  application  to  acquire  the  Chicago  Junction  Railway  raises  in  itself 
almost  all  the  possible  aspects  of  terminal  problems.  Consolidation  can  never  be 
effectively  brought  about  without  the  adoption  of  a  comprehensive  policy  as  to  ter- 
minal ownership,  operation,  or  both.    It  is  herein  assumed  that  free  access  will  be 

63 1.  C.  C. 


r 


464 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


'J 


somehow  provided,  either  under  the  present  emergency  powers  as  contained  in 
section  1,  paragraph  15c,  or  by  the  adoption  under  a  consolidation  plan  of  perma- 
nent arrangements  in  all  of  the  important  centers.  Possibly  the  assignment  of  ter- 
minal properties  might  take  place  by  means  of  leases  based  upon  valuation  by  the 
Commission  and  at  a  rate  fixed  by  the  Commission  as  reasonable.  This  would  per- 
mit the  terminal  companies  to  remain  under  the  joint  control  of  the  several  par- 
ticipating raiboads,  rather  than  that  entirely  independent  terminal  companies, 
actually  owing  these  facilities,  should  be  set  up.  The  important  point,  whatever 
the  means  adopted  to  this  end,  is  that  there  should  be  unified  operation  and  entirely 
free  access  to  all  participants  alike. 

Another  general  principle  con3tantly  kept  in  mind  in  connection  with  consolidation 
and  having  substantial  effect  upon  it  is  the  encouragement  of  alternate  routes  and 
gateways,  in  order  to  relieve  present  or  prospective  congestion  at  the  great  railway 
meeting  points.  A  tendency  has  been  strikingly  manifest  for  many  years  for  all  the 
great  systems  to  expend  funds  unstintingly  upon  their  main  stems,  and  all  of  these 
main  stems  tend  to  run  together  at  certain  nodal  points,  notably  New  York,  St.  Tx>ui8. 
and  Chicago.  Such  concentration  upon  great  cities  i?  a  natural  response  to  the  com- 
mercial forces  which  tend  with  increasing  power  to  attract  traffic,  even  although  it 
may  not  be  destined  for  that  place  but  may  be  passing  through  en  route  to  point« 
beyond.  The  shippers'  routing  often  dictates  such  shipments  in  order  to  take  advan- 
tage of  a  change  in  market  conditions.  The  result  has  been  an  undue  congestion  in 
times  of  emergency,  which  paralyzes  the  commerce  of  the  country-.  There  is  always 
a  certain  proportion  of  business,  however,  which  by  careful  attention  to  the  matter 
might  be  consolidated  and  shipped  by  an  alternate  route  which  should  avoid  the 
great  center.  Thus  the  Michigan  ferry  routes  or  certain  of  the  gateways  south  of 
Chicago  have  in  the  past  afforded  relief.  But  the  latter  especially,  it  is  submitted, 
have  not  in  the  past  received  the  attention  which  they  deserve,  and  an  attempt  has 
been  made  wherever  possible  to  cultivate  such  direct  relationships  between  the 
different  systems  proposed  by  the  establishment  of  definite  and  common  gatewavs 
of  this  sort. 

The  preparation  of  such  a  plan  of  consolidation  thus  affords  a  unique  opportunity 
for  the  evolution  of  a  comprehensive  plan  for  the  development  of  national  resources. 
Too  often  in  the  past  purely  temporary  or  personal  considerations  of  advantage  or 
profit  have  determined  the  location  of  our  American  railways.  The  administrative 
control  of  the  terms  on  which  the  carrier  companies  may  be  allowed  further  to  allj- 
themselves  in  the  future  may,  if  wisely  administered,  contribute  to  diminish  economic 
waste  and  to  promote  commercial  development.  But  such  wise  administration 
demands  a  comprehensive  plan  adopted  in  advance,  and  it  is  evidently  the  purpose 
of  the  act  to  draw  up  this  plan,  not  alone  for  the  attainment  of  the  immediate  rate- 
making  end  but  also  with  a  view  to  the  larger  purpose  of  a  right  direction  of  our 
economic  resources  as  a  nation  in  the  years  to  come. 

63 1.  C.  C. 


CONSOLIDATION  OF  RAILROADS. 


485 


Chapter  I.— Trunk  Line  Territory. 

Elements  of  the  situation  stated,  485. — Five  east-and-west  stems  available,  486.— Are 
there  enough  branches  and  feeders  for  five  or  only  four  systems?  487. — The 
components  for  only  four  systems  too  competitive  and  unnaturally  related,  487. — 
Five  systems  appear  necessary,  488. 

The  New  York  Central  system  slightly  reduced,  488.— Transfer  of  Lake  Erie  & 
Western,  488.— Also  the  Toledo  &  Ohio  Central,  and  the  Kanawha  &  Michigan, 
488. — The  Rutland  Railroad  and  possibly  the  Worcester,  Nashua  &  Portland 
added,  489. 

The  Pennsylvania  system  already  large  enough,  489.— The  Norfolk  &  Western  con- 
trol, 489. 

The  Baltimore  &  Ohio  system  needs  stated,  489. — Strengthening  the  western  end 
by  the  Monon,  490.— The  New  York  terminal  situation,  490.— Baltimore  & 
Ohio  investment  in  the  Philadelphia  &  Reading,  491.— Shall  the  Reading  be 
absorbed  or  treated  as  an  independent  terminal  property?  491. — The  geographic 
situation  (map),  491. — ^Analysis  of  Reading  trafiic  interchange  (diagram),  492. — 
The  terminal  situation  again,  493. — Western  Maryland  relationships,  493. — 
Legal  obstacles  to  its  merger,  494.— The  Pere  Marquette  connection,  494. 

The  present  Erie  system  described,  495.— The  Delaware  &  Hudson  added,  495.— New 
York,  Ontario  &  Western  added,  mainly  for  its  terminal  rights,  495.— The 
Lehigh  Valley  contributes  strength,  496.— The  Wabash  eastern  lines  reach  St. 
Louis,  496.— Pittsburgh  problem  stated,  496.— Status  of  the  Bessemer  &  Lake 
Erie,  496. — United  States  Steel  Corporation  claims  independence,  497. — Its  con- 
tentions met,  498. — Effect  of  inclusion  of  the  Bessemer  road,  498. 

The  New  York,  Chicago  &  St.  Louis  (Nickel  Plate)  stem,  499.— The  Delaware, 
Lackawanna  &  Western,  499.— The  Clover  Leaf  line  to  St.  Louis,  499.— Lake 
Erie  &  Western  and  other  additions,  499.— Access  to  Pittsburgh  via  Wheeling 
&  Lake  Erie,  500.— Baltimore  and  the  Western  Maryland,  500.— Southern 
detour  about  Washington,  501.— Buffalo,  Rochester  &  Httsbiu-gh  adds  traffic, 
501. — Comparative  statistics,  501.— The  Lackawanna  system  and  the  New 
England  roads,  502. 

The  Michigan  peninsula  trafiic,  502. — An  independent  group  or  parceled  among  the 
trunk  lines?  503.— Difficulty  of  partition  stated,  503.— Similarity  to  New 
England  situation,  503.— The  Ironton  added  as  a  fuel  line,  505.— The  American 
lines  in  Canada,  505. 

The  Lehigh  &  Hudson  and  Lehigh  &  New  England  as  "bridges, "  506.— Independent 
or  assigned  to  New  England  group,  506. 

Statistical  analysis,  based  upon  exhibits,  506. 

The  creation  of  independent  self-sufficient  systems  in  trunk  line  territory  which 
shall  compete  with  one  another  on  more  nearly  equal  terms  than  at  present  is  simpli- 
fied by  the  fact  that  the  traffic  is  predominantly  east  and  west  along  parallel  lines. 
But  it  is  complicated  by  the  disparity  in  size  and  competing  strength  of  the  various 
properties,  as  well  as  by  the  fact  that  a  considerable  number  of  the  railroads  consist 
of  disjoint^^d  links  lying  east  or  west  of  the  Niagara  frontier  or  else  divided  at  the  head 
of  Lake  Erie.    Furthermore,  some  of  the  strongest  systems  enjoy  a  superfluity  of 

63  I.  C.  C. 

63763—21 3 


486 


INTEBSTATE  COMMEKCE  COMMISSION   REPORTS. 


CONSOLIDATION  OF  RAILROADS. 


487 


I 


i 


\ 


■I 


4 


approaches  to  strategic  points,  acquired  perhaps  for  their  ''nuisance  value"  at  some 
time  in  the  past;  while  other  competing  roads  are  denied  access  to  those  strat-egic 
points.  And  the  rugged  Allegheny  territory,  with  its  north-and-south  valleys  and 
ridges,  in  any  event  leaves  but  a  few  available  east-and-west  passageways  which  are 
capable  of  utilization. 

The  elements  of  the  tnmk  line  situation,  it  is  believed,  are  set  forth  in  the  first 
large  map  in  the  series  hereto  appended.  This  sketch  embodies  an  attempt  to  produce 
all  of  the  existent  through  routes  from  Chicago  and  St.  Louis  to  the  seaboard.  All 
cross  lines  north  and  south  and  all  feeders  are  eliminated.  The  map  purports  to  show, 
therefore,  only  the  available  stems;  that  is  to  say,  available  in  the  light,  first,  of  existing 
corporate  relationships,  and,  secondly,  of  geographic  barriers.  If  one  were  to  cast 
all  of  these  lines  into  a  melting  pot,  other  routes  might  conceivably  be  developed, 
notably  those  which  run  directly  east  across  northern  Pennsylvania.  But  the  physical 
obstacles  are  so  considerable  that  these  are  ignored.  The  stems  shown  upon  this 
map  are,  however,  compounded  of  different  corporate  entities  in  some  cases.  The 
details  of  their  allocation  are  subsequently  worked  out,  one  by  one. 

Consideration  of  map  1,  then,  discloses  five  east-and-west  trunk  line  stems.  First 
is  the  historic  New  York  Central  route  by  way  of  the  Hudson  and  the  Mohawk  Valley, 
thence  north  and  south  of  Lake  Erie.  This  is  shown  by  the  heavy  black  line.  The 
second,  shown  by  a  string  of  beads  is  the  Pennsylvania  system,  splitting  in  Ohio  into 
stems  to  Chicago  and  St.  Louis  respectively.  The  third,  likewise  historic,  is  the 
Erie,  in  a  broken  line  with  crosses  which  follows  the  northern  boundary  of  Pennsyl- 
vania up  the  Delaware  River  and  passes  south  of  Lake  Erie  on  to  Chici^.  Its  natural 
extension  to  St,  Louis  is  by  way  of  the  Wabash  Railroad  as  indicated.  The  fourth 
route,  historically  considered,  under  unified  corporate  control,  both  to  Chicago  and 
St.  Louis,  is  the  Baltimore  &  Ohio,  which  splits  into  two  branches  in  Western  Mary- 
land. This  is  shown  by  the  heavy  broken  line.  The  fifth  rail  route  depicted  on  the 
map  is  composite,  consisting  of  a  combination  of  lines  east  and  west  of  Buffalo.  It  is 
designated  by  a  broken  line  with  circles.  West  of  Buffalo  the  Nickel  Plate  merely 
duplicates  the  Lake  Shore  &  Michigan  Southern.  East  of  Buffalo,  access  to  the 
seaboard  may  be  had  either  over  the  Lehigh  Valley  or  the  Delaware,  Lackawanna  & 
Western.  The  most  direct  line  to  New  York — almost  as  the  crow  flies — consists  of 
the  Lackawanna  from  New  York  to  Scranton,  then  up  the  valley  of  the  Susquehanna, 
along  the  line  of  the  Lehigh  Valley  Railroad  and  from  Elraira  along  the  Lackawanna 
i^in.  But  in  order  to  take  advantage  of  the  superb  physical  equipment  of  the 
Lackawanna,  its  line  is  followed,  even  somewhat  indirectly,  as  it  makes  an  elbow  at 
Binghamton.  The  combination  then  of  the  Lackawanna  east  of  Buffalo,  and  the 
Nickel  Plate  from  Buffalo  to  Chicago,  completes  the  array  of  the  five  standard  tnmk 
lines,  all  within  the  territory  of  the  United  States. 

To  complete  the  picture  presented  by  this  array  of  through  routes  east  and  west,  the 
following  table  of  distances  and  of  elevation  to  be  overcome  at  the  highest  point,  is 
significant. 


Route. 


Pennsylvania 

Lackawanna-Nickel  Plate 

New  York  Ontral 

Erie-Wabash 

Baltimore  &  Ohio 


New 

New 

York  to 

York  to 

Chicago. 

St.  Louis. 

Mileg. 

MiUs. 

908.9 

1,052.9 

919.0 

1,11.5.4 

978.72 

1.157.62 

998.  ."> 

1,174.3 

1,013.8 

1,117.8 

Hi^est 

point 

above  sea 

level. 


Feel. 
2,192 
1,115 
920 
1,773 
2,374 


63 1.  C.  C. 


There  can  be  little  doubt  as  to  the  justification  for  systems  as  separate  combinations, 
based  upon  the  first  three  of  the  five  lines  above  enumerated,  namely,  the  New  York 
Central,  the  Pennsylvania,  and  the  Baltimore  &  Ohio.  Nor  can  there  be  any  doubt 
of  the  existence  of  the  two  other  primary  through  routes.  But  a  most  difficult  ques- 
tion to  decide  is  as  to  whether  these  remaining  two  routes,  the  Erie  and  the  Lacka- 
wanna-Nickel Plate,  can  each  alone  be  provided  with  sufficient  entrances,  appurten- 
ances, and  feeders  to  enable  them  to  engage  successfully  in  a  well-balanced  competi- 
tion with  the  first  three  relatively  powerful  ones.  These  three  have  so  far  preempted 
the  best  lines  and  facilities  that  the  supply  remaining  is  rather  inadequate.  For  it 
is  obvious  that  mere  stems  are  insufficient.  There  must  be  access  to  important  lalre 
and  Ohio  River  gateways.  There  must  be  access  to  direct  connection  with  western 
trunk  lines  through  gateways  other  than  Chicago,  along  the  Illinois  River  or  the 
Mississippi.  There  should  be  free  participation  in  Michigan  ferry  routes,  avoiding 
Chicago  by  going  northwest  through  Michigan.  And,  of  especial  importance,  there 
must  be  access  to  the  great  soft-coal  deposits  and  to  the  centers  of  production  of  iron 
and  steel.  Without  a  fair  proportion  of  business  of  these  various  sorts  no  trunk  line 
can  persist  in  successful  competition. 

The  prime  decision  then  as  to  trunk  line  consolidation  has  to  do  with  the  fate  of  the 
Erie  stem  and  that  of  the  Lackawanna-Nickel  Plate.    They  ought  to  constitute  the 
trunks  of  independent  self-sufficient  systems.    It  would  contribute  to  stability  were 
they  to  do  so.    But  if  there  are  not  enough  available  extensions  and  feeders,  the  only 
thing  to  do,  in  pursuance  of  the  mandate  of  the  statute,  is  to  consolidate  the  two 
possible  systems,  and  to  utilize  the  existing  approaches  and  feeders  for  their  joint 
benefit.    To  this  procedure  there  are  two  objections,  of  decisive  importance.    The 
first  is  that  the  Erie  and  the  Nickel  Plate- Lackawanna,  with  their  extensions  to  St. 
Louis,  as  above  described,  parallel  each  other  almost  completely  from  end  to  end- 
without  at  the  same  time  being  near  enough  together  to  produce  the  possible  advantage 
oi  joint  operation.    Did  they  lie  still  closer  together,  especially  where  they  are  single- 
track  lines,  the  two  systems  might  constitute  together  a  double-track  railroad,  each 
specializing  in  one  direction.    But  they  are  too  far  apart  for  this,  and  yet  not  unique 
enough  in  location  as  to  one  another  as  to  fully  warrant  independent  existence.    It 
has  been  urged  by  competent  authority  that  the  Nickel  Plate  and  the  Erie  might  be 
worked  as  a  double-track  line  because  of  the  peculiar  character  of  much  of  their  busi- 
ness.   They  are  both  relatively  light  passenger  lines  and  transport  large  amounts  oi 
fruit,  vegetables,  beef,  and  other  tonnage  which  moves  in  carload  or  trainload  lots, 
little  of  it  being  local.    It  is  urged  that  one  of  these  lines  could  be  utilized  for  the 
prompt  return  of  the  foreign  empties,  which  tend  to  pile  up  in  trunk  Une  territory. 
The  continual  surplus  of  cars  in  the  east,  due  to  the  heavy  influx  of  bulky  raw  materials, 
renders  it  a  matter  of  common  importance  to  all  lines  that  these  empty  cars  should  be 
handled  westboimd  in  big  units.    Another  reason  urged  for  throwing  all  of  these 
lines,  except  the  Pennsylvania,  New  York  Central,  and  Baltimore  &  Ohio,  into  a 
single  system,  is  that  their  aggregate  tonnage  would  then  just  about  equal  that  of  the 
Pennsylvania  system.    This  will  appear  from  examination  of  the  operating  statistics 
in  exhibit  1.    But,  on  the  other  hand,  such  a  system  would  have  an  aggr^ate  mile- 
age operated  of  12,500  miles  as  compared  with  10,700  miles  for  the  Pennsylvania.    Its 
aggregate  volume  of  traffic  in  revenue  ton-miles,  would. far  and  away  exceed  that  of 
the  present  New  York  Central  system. ,   Considering  the  detached  character  of  many 
of  these  properties,  a  heterogeneous  aggregation  altogether  surpassing  the  possibility 
of  efficient  management  would  certainly  be  produced.    It  is  believed,  therefore, 
that  five  systems  rather  than  four  will  best  satisfy  the  needs  of  the  territory  in  the 
year?  to  come. 

Another  objection  to  constituting  one  system  out  of  the  Erie  and  the  Lackawanna- 
Nickel  Plate  stems  is  that  it  would  enforce  corporate  relationships  which  are  unnat- 
63 1.  C.  C. 


u 


488 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


uTal  or  strained.  Each  of  the  two  end-to-end  alliances,  as  herein  indicated,  is  so 
self-evident  and  advantageous  that  the  matter  of  consolidation  has  in  the  past  already 
been  given  private  and  self-interested  consideration .  To  put  these  properties  together 
in  each  group  might  be  practicable;  but  to  attempt  a  combination  of  the  two  parallel 
groups  would  compel  roads  which  have  been  bitter  competitors  for  many  years  to 
become  partners.  All  things  considered,  especiaUy  having  in  view  the  fact  that 
most  of  the  trunk  line  business  of  future  years  is  likely  to  accrue  to  these  existing 
companies,  it  is  believed  that  sound  national  policy  should  indorse  the  independence 
of  all  five.  Feeders,  entrances,  and  approaches  may  be  built  in  futiu-e  years,  but 
new  main  stems  are  unlikely.  If  perchance  these  two  stems  of  the  Erie  and  the 
Lackawanna-Nickel  Plate  are  not  yet  adequately  supported  in  this  regard,  the  defi- 
ciencies may  be  supplied.  But  if  the  two  stems  were  once  merged  and  in  years  to 
come  there  proved  to  be  business  enough  for  both ,  it  would  be  difficult  if  not  impossible 
to  dismember  the  alliance.  This  plan  proceeds,  therefore,  to  construct,  as  well  as 
may  be  out  of  the  existing  material,  five  independent  trunk  lines.  There  will  also 
be,  of  course,  a  sixth  pseudo  trunk  line,  the  Chesapeake  &  Ohio,  which  is,  however, 
considered  in  the  separate  Chesapeake  Bay  group  of  properties,  based  upon  Hampton 
Roads  and  preeminently  engaged  in  soft-coal  business. 

It  is  next  in  order  to  consider  the  constitution  of  these  five  proposed  groups  in 
detail,  having  in  mind  size,  financial  strength,  and  comprehensive  possession  of  the 
trunk  line  territory.  By  all  three  of  these  tests,  the  New  York  (Central  and  the  Penn- 
sylvania have  substantially  fulfilled  their  destiny  within  the  confines  of  this  region. 
In  other  words,  they  reach  all  of  the  important  centers  and  gateways,  and  enjoy  a 
sufficiency  of  direct  lines  criss-cross  from  point  to  point  all  over  their  own  rails. 
Their  problems  for  the  future  are  of  intensive  rather  than  extensive  development;  and 
it  will  be  found  that  certain  lines  may  be  abstracted,  or,  at  all  events,  given  joint 
usage  by  the  other  groups,  without  injury  to  them  commensurate  with  the  advantage 
which  would  accrue  to  the  trunk  line  territory  as  a  whole  from  equalization  of  com- 
petitive strength. 

The  present  New  York  Central  system  (map  3)  has  a  somewhat  greater  mileage  than 
the  Pennsylvania,  but  the  Pennsylvania,  by  reason  of  its  density  of  traffic,  has  a 
much  greater  railway  operating  revenue  and  volume  of  tonnage.  By  either  test  these 
two  great  systems  so  far  exceed  all  of  the  others  in  trunk  line  territory  that  the  problem 
is,  in  the  main,  one  of  withdrawal  of  subsidiary  lines  rather  than  of  additions  thereto. 
Thus,  the  Lake  Erie  &  Western,  which  is  controlled  by  stock  investment,  but  has 
long  been  operated  separately  as  a  competing  road,  is  transferred.  It  is  believed 
that  a  better  use  may  be  found  for  it  in  connection  with  the  other  components  of  the 
Lackawanna  system,  giving  it  access  to  the  Peoria  gateway  as  a  means  of  avoiding 
congestion  at  Chicago.  The  New  York  Central  now  concentrates  upon  the  so-called 
Kankakee  division  as  a  Chicago  belt  line,  affording  a  western  gateway  susceptible  of 
still  further  development.  As  for  the  southeastern  gateway  at  Williamsport,  it  is 
proposed  elsewhere  in  connection  with  the  Baltimore  &  Ohio  (page  493,  infra)  to 
protect  this  by  trackage  into  Jersey  City.  The  withdrawal  of  the  Lake  Erie  &  West- 
em,  thus  recommended,  would  not  appear  to  be  prejudicial.  The  New  York  Central 
would  still  be  in  possession  of  contacts  and  routes  adequate  for  all  through  business, 
although,  of  course,  it  might  lose  the  local  traffic  originating  along  this  line.  But  not 
quite  all  of  the  Lake  Erie  &  Western  is  taken.  The  line  from  Connersville  and  Rush- 
ville  to  Fort  Wayne  affords  a  natural  connection  for  the  New  York  Central  from  Louis- 
ville and  Cincinnati  to  Fort  Wayne  and  Jackson  for  connection  with  the  Michigan 
Central.  But,  with  this  exception,  the  Lake  Erie  &  Western,  which  has  been  con- 
trolled by  the  Lake  Shore  since  1899,  is  taken  away.  The  Kanawha  &  Michigan  and 
parts  of  the  Toledo  &  Ohio  Central  Railroad  are  also,  as  it  will  appear  in  treatment  of 
the  Chesapeake  soft-coal  roads,  assigned  to  the  Chesapeake  railways,  in  order  to  create 

63LaG. 


CONSOLIDATION   OF   RAILROADS. 


489 


an  independent  outlet  to  the  lakes.  And  a  portion  of  the  Toledo  &  Ohio  Central  is 
also  utilized  to  complete  certain  necessary  routes  in  the  Nickel  Plate  group. 

On  the  other  hand,  the  New  York  Central  lines  are  extended  by  definite  inclusion  of 
the  Rutland  Railroad,  thereby  giving  more  complete  control  of  a  route  to  the  Cana- 
dian maritime  provinces.  The  relations  between  the  New  York  Central  and  the 
Rutland  are  quite  intimate.  In  1917  it  delivered  two  and  five-tenths  times  as  many 
loads  to  the  Rutland  Railroad  as  did  its  nearest  neighbor,  the  Delaware  <&  Hudson; 
and  received  back  from  the  Rutland  five  times  as  many  loads  as  did  the  Delaware  & 
Hudson.  Whether  the  New  York  Central  shall  be  extended  into  Portland,  Me.,  by 
transfer  to  the  Boston  &  Albany  of  the  old  Worcester,  Nashua  &  Portland,  running 
from  Worcester  northeast,  is  problematical.  If  New  England  is  to  remain  split  up 
into,  a  number  of  dissociated  properties,  this  strong  trunk  line  ought  to  penetrate  to 
Portland  in  order  to  give  that  center  the  benefit  of  direct  interchange.  If  New  Eng- 
land be  treated  as  a  single  group,  or  even  if  the  northern  half  be  consolidated,  there 
would  obviously  be  no  advantage  in  this  extension. 

The  Pennsylvania  system  (map  2)  is  at  present  richly  represented  by  mileage 
tliroiigliout  trunk  line  territory.  But  it  is  in  volume  of  traffic  handled  that  it  stands 
forth  preeminent  among  its  neighbors,  not  excepting  the  New  York  Central.  By 
exliibit  1  it  appears  that  in  1917  its  revenue  ton-miles  exceeded  those  of  this, 
its  sole  great  rival,  by  approximately  20  per  cent.  Both  in  size  and  in  influence, 
therefore,  it  so  far  exceeds  the  lesser  systems  that  the  burden  of  proof  necessarily  rests 
upon  any  proposal  to  add  still  further  to  its  extent.  The  possibility  of  merger  with 
the  New  York,  New  Haven  &  Hartford  is  discussed  in  connection  with  New  England ; 
and  the  proposal  is  rejected  among  other  reasons  upon  the  ground  that  the  Pennsyl- 
vania has  already  attained  a  predominance  among  the  trunk  lines  which  renders 
further  accessions  undesirable.  This,  again,  is  a  serious  objection  to  permanent 
incorporation  within  the  Pennsylvania  group  of  the  Norfolk  &  Western  Railway. 
This  property  has  been  controlled  and  largely  developed  under  a  substantial  stock 
ownership  by  the  credit  of  the  Pennsylvania.  Its  immense  coal  traffic  undoubtedly 
constitutes  a  reserve  upon  which  the  Pennsylvania  might  draw  after  depletion  of  its 
own  coal  measures  in  Pennsylvania.  The  Norfolk  &  Western  is  a  connection  and  not  a 
competitor.  The  Pennsylvania  transports  most  of  its  coal  from  Columbus  and  Cin- 
cinnati west  and  northwest,  and  also  carries  its  coal  to  the  east  and  northeast.  But 
despite  this  long-standing  connection  and  the  substantial  investment,  wise  direction, 
and  highly  efficient  management  it  is  believed  that  sound  public  policy,  viewing 
the  railroad  situation  as  a  whole,  warrants  treatment  of  the  Norfolk  &  Western  as 
independent  rather  than  as  a  subsidiary  part  of  one  of  the  great  trunk  Unes.  This 
matter  is  discussed  elsewhere  in  connection  with  the  Hampton  Roads  properties. 
(See  page  533,  infra.) 

But  wliether  the  Norfolk  &  Western  be  separated  entirely  as  to  stock  ownership 
from  the  Pennsylvania  or  not,  it  is  proposed  that  the  line  of  the  Norfolk  &  Western 
be  extended  independently  from  Columbus  to  Lake  Erie.  This,  as  will  appear  in 
connection  with  the  treatment  of  the  Chesapeake  group,  is  part  of  a  definite  policy 
to  create  a  group  of  independent  lake-to-tide  properties,  cutting  in  their  courses  all 
of  the  five  trunk  lines  and  thereby  contributing  to  a  greater  freedom  of  movement. 
Several  proposals  for  the  accomplishment  of  this  end  are  offered  in  due  time  for  con- 
sideration, but  the  only  one  which  directly  affects  the  Pennsylvania  is  the  suggestion 
either  of  a  grant  of  trackage  rights  or  actual  lease  of  the  former  Columbus,  Sandusky  & 
Hocking,  now  a  division  of  the  Pennsylvania  system.  The  other  method,  and  the  one 
recommended  for  adoption,  of  utilization  of  the  Toledo  &  Ohio  Central  lines  would 
obviate  this  necessity  for  the  disturbance  of  the  Pennsylvania.  But  regardless  of 
means,  there  can  be  no  question  as  to  the  national  advantage  of  provision  by  one  way 
or  another  of  a  western  outlet  to  the  Norfolk  &  Western  independent  of  the  Pennsylva- 
nia system. 

63 1.  C.  C. 


li 


I 

\ 


490 


INTERSTATE   COMMERCE  COMMISSION  REPORTS. 


1 


' 


Next  in  order  of  importance  in  trunk  line  territory  is  the  Baltimore  &  Ohio  system. 
Its  location  appears  on  map  4.  This  property  has  less  than  one-half  of  the  mileage 
of  the  Pennsylvania.  Its  revenue  ton-mileage  in  1917  was  scarcely  more  than  one- 
third  as  great.  It  has  a  considerable  extent,  reaching  Chicago  and  St.  Louis  and  the 
neighborhood  of  Philadelphia  upon  its  own  rails,  but  it  has  no  access  of  its  own  into 
New  York,  being  dependent  upon  the  favor  of  the  Reading  and  the  Central  of  New 
Jersey.  It  is  a  powerful  trunk  line,  but  with  an  extensive  development  only  in  the 
middle  field  of  Ohio,  West  Virginia,  and  western  Pennsylvania.  It  is  attenuated 
both  east  and  west.  And  in  order  to  strengthen  it  financially  and  as  a  competitive 
factor  throughout  trunk  line  territory  it  needs  upbuilding  at  each  of  its  extremities. 
The  problem  with  the  Baltimore  &  Ohio,  therefore,  is  to  incorporate  it  with  other 
properties  which  shall  let  it  into  New  York  and  into  good  traffic-originating  eastern 
territor>'  and  which  shall  also  extend  its  mileage  to  the  Michigan  peninsula  and 
ferries  and  out  across  Indiana  and  Illinois  to  connections  other  than  through  Chicago 
with  trans-Mississippi  systems.  The  last  of  these  objects  is  accomplished  by  reassign- 
ment to  the  Baltimore  &  Ohio  of  the  Cincinnati,  Indianapolis  &  Western  Railroad. 
This  property  was  formerly  a  part  of  the  Cincinnati,  Hamilton  &  Dayton  but  was  set 
off  from  it  under  reorganization.  Its  reinclusion  in  the  system,  if  this  road  were 
physically  improved  to  standard,  might  also  lead  on,  by  means  of  trackage  over  the 
Chicago  &  Alton  or  the  Illinois  Central,  for  example,  as  shown  by  map  4,  into  the 
common  gateway  set  up  as  a  meeting  point  for  all  systems  east  and  west  at  Peoria. 

The  Baltimore  &  Ohio  is  also  strengthened  at  its  western  end  by  inclusion  of  the 
Chicago,  Indianapolis  &  Louisville,  otherwise  known  as  the  Monon.  This  road  is  now 
jointly  controlled  through  stock  ownersliip  by  the  Southern  Railway  and  the  Louis- 
ville &  Nashville;  but,  as  elsewhere  set  forth  in  chapter  IV,  it  seems  to  be  of  little  use 
to  the  Louisville  &  Nashville,  which  exchanges  Chicago  business  primarily  at  Evans- 
ville.  And,  furthermore,  the  policy  is  definitely  adopted  in  this  plan  of  confining 
the  southeastern  systems  closely  within  their  own  territory-;  stopping  them,  that  is  to 
say,  at  the  Ohio  River  gateways.  This  policy  releases  tlie  Monon  and  permits  it  to  be 
built  into  the  Baltimore  &  Ohio,  giving  it  direct  connection  between  Louisville, 
Indianapolis,  and  Chicago.  An  identity  of  interest,  manifested  in  the  past  by  the 
joint  maintenance  of  passenger  and  freight  service  by  the  Baltimore  &  Ohio  and  the 
Monon  between  Cincinnati  and  Chicago,  is  thus  revived. 

The  outstanding  problem  as  respects  upbuilding  the  Baltimore  &  Ohio  system 
has  to  do  with  the  status  of  the  Philadelpliia  &  Reading  Railroad.  Shall  it  be  incor- 
porated therein  or  treated  as  an  independent  terminal  not  unlike  New  England? 
Its  location  is  such  that  close  relationship  through  ownership  and  interchange  of 
traffic  with  the  Baltimore  &  Ohio  has  subsisted  for  many  years,  and  it  is  now  proposed 
that  it  be  completely  merged  in  the  Baltimore  &  Ohio  system.  But  the  relationship 
of  the  Reading  to  the  other  trunk  lines  and  its  strategic  location  in  the  heart  of  one 
of  the  greatest  industrial  districts  in  the  United  States  render  this  a  difficult  matter 
to  decide.  On  the  one  hand  its  essential  relation  to  the  Baltimore  &  Ohio  must  be 
conceded,  but  on  the  other  it  is  of  the  utmost  importance  that  the  general  interest 
of  the  other  trunk  lines  in  this  territory  should  not  be  placed  in  jeopardy. 

Independent  entrance  into  New  York  over  its  own  rails  is  essential  to  a  Baltimore 
&  Ohio  group  if  it  is  to  continue  to  compete  effectively  with  the  other  systems.  At 
present  it  is  dependent  upon  the  Philadelphia  &  Reading  and  the  Central  of  New 
Jersey,  not  even  having  trackage  rights,  but  turning  over  its  trains  beyond  Phila- 
delphia to  those  roads  for  operation.  It  is  necessary  for  improvement  of  the  service, 
and  the  public  would  be  correspondingly  benefited,  if  the  Baltimore  &  Ohio  were 
enabled  to  operate  its  own  trains  with  its  own  crews  and  engines  into  New  York.  It 
already  owns  substantial  freight  terminals  on  Staten  Island,  with  a  warehouse  and 

63 1.  C.  C. 


C! 


CONSOLIDATION  OF  RAILROADS.  491 

delivery  yard  on  Manhattan  Island.    But  these  properties,  operated  with  Baltimore 
<fe  Ohio  forces,  are  obliged  to  use  other  roads  as  an  approach.    The  satisfaction  of  this 
need  is  imperative.    Either  full  trackage  rights  from  Philadelphia  to  New  York  must 
be  given,  or  the  Reading  and  the  Central  of  New  Jersey  should  be  incorporated  in 
the  Baltimore  &  Ohio  system.    Decision  upon  this  important  point  compels  a  some- 
what detailed  examination  of  the  relation  of  the  Reading  and  of  the  Central  of  New 
Jersej^  to  the  other  trunk  lines.    Choice  must  be  made  apparently  between  the  alter, 
natives:  first,  of  treating  the  Philadelpliia  &  Reading  and  the  Central  of  New  Jersey 
as  a  part  of  the  Baltimore  &  Ohio  system;  and,  secondly,  of  conceding  the  joint  interest 
of  the  other  trunk  lines  in  this  great  industrial  section  by  assignment  of  an  inde- 
pendent neutral  statiis  to  these  properties,  treating  them  primarily  as  open  terminals. 
As  to  corporate  relationships,  the  Baltimore  &  Oliio  seems  to  have  sought,  first 
among  the  trunk  lines,  to  protect  its  interest  by  a  purchase  in  1901  of  43.3  per  cent  of 
the  stock  of  the  Reading  Company. »    Then  through  partial  control  by  the  Pennsyl- 
vania system  of  the  Baltimore  &  Ohio  Railroad,  and  because  of  powerful  banking 
interests  in  New  York,  a  so-called  gentlemen's  agreement  for  the  preservation  of  the 
status  qiw  in  trunk  line  territory  was  entered  into.    The  outcome  was  the  assurance  of 
a  balance  of  power  through  division  of  the  Baltimore  &  Ohio  investment  in  the  Read- 
ing in  equal  measure  with  the  Lake  Shore.    The  New  York  Central,  owning  90.6  per 
cent  of  stock  of  the  Lake  Shore,  thus  got  21.66  per  cent  of  the  stock  of  the  Reading, 
an  amount  precisely  equal  to  the  investment  of  the  Baltimore  &  Ohio  therein.    The 
Pennsylvania,  under  pressure  of  public  opinion,  after  1906,  withdrew  from  this 
Baltimore  &  Ohio  investment.    But  the  New  York  Central  has  remained  an  equal 
participant  in  ownership.    The  combined  holdings,  in  equal  shares,  of  the  Baltimore 
<fe  Ohio  and  New  York  Central  in  the  Reading  are  as  follows: 

Percentage 
„.  Stock  owned,   of  whole. 

liJoKSm^ • -• 242,600  shares        43.32 

Smon  570,600  shares         67.93 

common 400, 100  shares        28.58 

'^°*^ 1,213,300  shares         43.33 

This  intercorporate  relationship,  it  is  believed,  is  not  in  the  public  interest  in  the 
long  run.  It  savors  too  much  of  a  deadlock.  Responsibility  for  efficient  management 
should  be  focused  upon  one  prime  owner.  The  complete  merger  of  the  Reading 
railroad  properties  in  the  Baltimore  &  Ohio  should,  however,  if  it  be  recommended, 
recognize  the  traffic  interest  of  the  New  York  Central,  which  should  be  afforded  every 
measure  of  protection  short  of  actual  ownership. 

The  geographic  location  of  the  various  properties,  and  especially  the  part  played 
by  the  Reading  in  the  formation  of  through  routes  to  the  west,  is  set  forth  in  the 
accompanying  (folded)  map.  This  shows  that  the  Baltimore  &  Ohio,  which  terminates 
at  Philadelphia,  is  absolutely  dependent  upon  the  Reading,  and  tlirough  it  upon  the 
Central  Railroad  of  New  Jersey,  for  an  entrance  into  New  York.  But  the  same  map 
shows  that  the  New  York  Central  Railroad  is  also  dependent  for  a  direct  route  from 
the  west  from  Newberry  Junction  (Williamsport)  both  into  New  York  and  into 
Philadelphia  and  the  surrounding  industrial  territory.  This  dependence  of  the 
New  York  Central  is  even  more  clearly  indicated  upon  the  large  map  (3).  Large 
quantities  of  coal  and  other  freight  from  the  lines  west  of  Williamsport  reach  tide- 
water at  New  York  in  competition  with  both  the  Pennsylvania  and  the  Baltimore  & 
Ohio.  Furthermore,  the  New  York  Central  owns  80,000  acres  of  coal  lands  in  Pennsyl- 
vania which  deserve  protection.  A  similar  relationship  on  the  part  of  the  Pennsyl- 
vania obtains  at  Harrisburg.  The  Reading  from  this  point,  and  especially  in  con- 
nection  with  the  Central  Railroad  of  New  Jersey  through  Allentown,  affords  a  line 

»  DetaUs  in  Special  Report,  Interstate  Commerce  Commission,  on  Intercorporate  Relations  of  RaQways 
63  I.  C.  C. 


ll 


492 


INTERSTATE   COMMERCE  COMMISSION   REPORTS. 


t 


which  cuts  straight  across  to  New  York,  avoiding  the  congestion  about  Philadelphia 
entirely.  But  it  is  also  true  that  in  even  greater  degree  the  Baltimore  &  Ohio  is 
dependent  upon  the  Reading,  not  alone  for  its  entrance  into  New  York  north  of 
Philadelphia,  as  above  stated,  but  also  because  of  its  dependence  upon  a  cross-countrj' 
interior  route  for  its  immense  coal  tonnage  destined  for  the  Reading  industrial  ter- 
ritory and  for  all  of  New  England,  which  lies  heyond.  This  interior  route  is  best 
shown  upon  the  large  map  (4)  of  the  Baltimore  &  Ohio  system.  For  a  generation  an 
enormous  coal  tonnage  has  customarily  left  the  line  of  the  Baltimore  &  Ohio  west  of 
Hagerstown,  Md.,  and  has  passed  north  from  that  point  up  the  Cumberland  Valley 
(Pennsylvania  Railroad)  to  Shippensbiu-g  on  the  Reading,  and  so  on  to  the  northeast 
over  the  connecting  link  of  the  Lehigh  &  Hudson  to  Maybrook,  N.  Y.,  and  the  entire 
New  Haven  system.  Another  connecting  link  is  the  Western  Maryland,  which  parallels 
the  Cumberland  Valley  and  admits  the  Baltimore  &  Ohio  to  the  Reading  rails  at 
Luigan.  This  is  the  historic  interior  short  route,  avoiding  Philadelphia  and  New  York, 
parallel  with  the  seaboard,  up  to  the  northeast.  The  interest  of  the  Baltimore  &  (Jhio 
in  the  full  utilization  of  this  route  must  be  conceded.  The  detail  may,  for  a  moment, 
be  neglected  of  the  dependence  for  a  connection  between  the  two  systems  upon  either 
the  Cumberland  Valley  (Pennsylvania  Railroad)  or  the  Western  Maryland  over  the 
short  stretch  of  intervening  country.  The  dotted  lines  of  the  Western  Maryland  on 
the  large  map  (6)  indicate  this  relationship.  And  it  will  in  due  time  call  for  con- 
sideration of  the  status  of  the  Western  Maryland  itself.  But  for  the  moment  attention 
must  be  concentrated  upon  the  Reading  alone. 

Such  being  the  geographic  conditions,  what  is  the  relative  participation  of  these 
surrounding  trunk  lines  in  the  Reading  car  movement?  If  it  be  established  that  the 
great  trunk  lines  all  participate  in  fairly  equal  measure,  then  the  claim  of  the  Balti- 
more &  Ohio  to  inclusion  of  the  Reading  reduces  itself  solely  to  consideration  of  the 
terminal  situation  at  New  York.  But  if,  on  the  other  hand,  a  heavy  predominance 
of  Baltimore  <Sc  Ohio  interchange  be  established,  its  claim  to  control  assumes  a  dual 
basis  rather  than  one  which  is  sole. 

The  facts  as  to  car  interchange  for  the  typical  month  of  October,  1920,  are  set  forth 
in  the  accompanying  diagram.  This  shows  the  number  of  cars  received  by  the 
Reading  from  each  of  its  connections  and  in  turn  delivered  over  to  them.  The  heavy 
New  York  Central  interchange  through  Newberry  Junction  is  at  once  apparent.  It 
is  sufficiently  heavy  to  merit  protection  of  this  route,  which  is  a  direct  freight  line 
of  impdrtance  to  the  country.  It  is,  moreover,  in  effect  a  double-track  road  with 
one  low-grade  track.  But,  of  course,  the  major  interest  of  the  New  York  Central 
in  through  business  lies  elsewhere.  The  suggestion  has  been  made  that  the  Central 
of  New  Jersey  might  be  separately  allocated  to  the  New  York  Central  to  complete 
this  route  and  also  to  give  that  system  terminals  on  the  West  Shore.  This  will  be 
considered  in  another  connection.  As  to  car  interchange,  the  Baltimore  &  Ohio 
traffic  enters  not  alone  directly  at  Philadelphia,  but,  as  above  described,  practically 
all  of  the  Cumberland  Valley  and  much  of  the  Western  Maryland  business  from  the 
southwest  originates  on  the  Baltimore  &  Ohio.  The  net  result  is  indicated  for  a  typical 
month,  October,  1920,  in  the  following  table  of  car  interchange  with  the  Reading. 

ReceivxHi.    T>elivered. 

Baltimore <b  Ohio  (allpoints'J m,f»S  33,075 

Xeiv  York  Central  (all  points) 21,77:i  17,5Sfi 

Pennsylvania 19,313  2\,W> 

This  establishes  the  substantial  interest  of  the  three  great  trunk  lines.  But  it  also 
makes  plain  the  predominant  interest  of  the  Baltimore  &  Ohio.  The  Reading  received 
almost  40  per  cent  more  cars  from  the  Baltimore  &  Ohio  than  from  the  New  York 
Central,  and  its  deliveries  were  almost  double.  Baltimore  &  Ohio  records  indicate  a 
total  interchange  of  from  1,400  to  1,600  cars  per  day,  which  appears  to  be  more  than 

KLlf  .  63I.aC. 


4 
It 


NSW  YO/KK 


^  PORT  fieADWS  e^OSSlHS 


CAR /l^£:/^CH^/VG£  CAMffT 
ro/f  OcrOB£ff.  /920. 


0n/e3s  o^hefwise  noiecff  fhe  numketof 
cats  shown  QSf^ce'i^tf  or  <idi\/efed at-A 
/oca/  on/y. 


DMe.I7,f9tO. 


63763—21.    (To  face  pic«  «3.) 


I 


CONSOLIDATION   OF  RAILROADS. 


493 


tf 


.L 


three  times  as  much  as  the  interchange  with  the  other  trunk  lines.  And  this  business, 
be  it  observed,  is  more  largely  through  business;  whereas  for  the  New  York  Central 
the  preponderance  is  local  to  Reading  territory,  although  NewgYork  takes  a  good  deal. 
Furthermore,  many  of  the  large  steel  interests,  at  Bethlehem,  for  example,  are  entirely 
dependent  upon  Baltimore  &  Ohio  coal.  All  of  the  facts,  after  duly  weighing  them, 
substantiate  the  claim  of  the  Baltimore  &  Ohio  on  this  ground  alone  to  merger  of  the 
Reading.  But  it  is  equally  true  that  the  public  interest  will  be  subserved  only  by 
assurance  of  free  utilization  of  the  Reading  and  Central  of  New  Jersey  rails  by  the 
other  surrounding  railroads,  especially  the  New  York  Central .  This  might  be  afforded 
in  either  one  of  two  ways:  The  first  would  be  as  above  mentioned,  the  consolidation 
of  the  Central  of  New  Jersey  with  the  Reading,  reserving,  however,  to  the  New  York 
Central  trackage  from  the  Williamsport  gateway  (Newberry;junction)  through,  by  way 
of  Tamaqua  and  AUentown,  to  Bound  Brook  and  Jersey  City.  The  alternative  would 
be  to  give  the  main  line  of  the  Central  Railroad  of  New  Jersey  (map  4)  from  Tamaqua 
to  Jersey  City  to  the  New  York  Central,  together  with  trackage  on  the  Reading  from 
Tamaqua  on  to  Williamsport  (Newberry  Junction) .  Possibly,  also,  the  line  up  to  Scrari- 
ton  might  go  with  this  main  line.  In  this  event  there  should  be  reserved  to  the  Balti- 
more &  Ohio,  the  Reading  trackage  rights  from  AUentown  north  and  east.  This  would 
protect  the  Baltimore  &  Ohio  through  line  via  Harrisburg  and  Reading  to  New  England 
and  New  York.  The  significant  point  is  that  both  the  New  York  Central  and  the 
Baltimore  &  Ohio  have  an  interest  in  this  Central  of  New  Jerseyjproperty;  and,  which- 
ever one  takes  it,  protection  for  the  through  route  of  the  other  should  be  afforded. 
Incidentally,  of  course,  provision  would  have  to  be  made  for  some  joint  use  of  the 
valuable  terminals  of  the  Central  Railroad  of  New  Jersey  at  Jersey  City,  although 
the  New  York  Central's  West  Shore  yards  certainly  give  it  already  more  elbow  room 
than  the  other  roads  enjoy. 

The  terminal  situation  at  New  York  constitutes  the  other  claim  of  the  Baltimore  & 
Ohio  to  the  Reading  and  the  Central  Railroad  of  New  Jersey.  The  Baltimore  &  Ohio 
has  a  substantial  investment  in  terminals  on  Staten  Island  and  a  large  and  constantly 
growing  volume  of  traffic  into  New  York.  It  ought  not  to  be  dependent  upon  mere 
running  rights  north  of  Philadelphia;  but  it  ought  to  be  in  position  to  operate  its  own 
trains  with  its  own  crews  and  engines  clear  into  the  terminals.  The  coal  and  mer- 
chandise docks  on  Staten  Island  and  the  warehouses  and  delivery  yards  on  Man- 
hattan Island  are  operated  with  Baltimore  &  Ohio  forces;  but  from  Cranford  Junction 
to  Philadelphia  the  Reading  and  the  Central  are  merely  used  as  a  bridge.  Some 
train  crews  run  through  to  Cranford,  and,  contrariwise,  some  Reading  crews  run  south 
to  Wilmii^ton.  But  much  more  efficient  and  satisfactory  operating  conditions  would 
certainly  result  from  single  ownership  and  unified  operation.  The  advantages  were 
so  manifest  that  under  federal  control  the  Director  General  placed  the  Reading, 
the  Jersey  Central,  the  Baltimore  &  Ohio,  and  the  Western  Maryland  under  one 
regional  director. 

Shall  the  Western  Maryland  be  included  in  the  Baltimore  &  Ohio  trunk  line  group? 
Consideration  of  the  large  map  (4)  and  the  preceding  text  has  indicated  its  importance 
as  a  connecting  link  from  Cherry  Run  on  the  Baltimore  &  Ohio  for  an  interior  north- 
east route  to  New  England  and  New  York.  In  some  respects  the  Western  Maryland 
would  thus  build  in  satisfactorily;  but,  on  the  other  hand,  it  is  apparent  that  the  two 
lines  practically  parallel  one  another  from  the  seaboard  to  western  Pennsylvania. 
The  Western  Maryland  would  appear  more  satisfactorily  to  serve  the  public  interest 
as  a  western  outlet  for  a  through  route  from  Lake  Erie  via  Pittsbiu^gh.  One  such  route 
by  a  short  piece  of  intermediate  construction  could  be  formed  with  the  Wheeling  & 
Lake  Erie.  This  is  developed  on  map  6  by  construction  to  Wheeling  for  the  Nickel 
Plate-Lackawanna  group.    Such  was  the  relationship  set  up  in  the  ill-fated  Gould 

63 1,  a  c. 


494 


INTERSTATE  COMMERCE  COMMISSION   REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


495 


r 


P 


aystem  many  years  ago.    The  project  was  actively  revived  before  the  war  by  Western 
Maryland  interests.    A  natural  through  route  is  indicated,  especially  in  connection 
with  the  now  reorganized  Pittsburgh  &  West  Virginia  terminals  in  Pittsburgh.    This 
plan  apparently  succeeded  the  arrangements  effected  by  the  New  York  Central  about 
10  years  ago  under  which  the  Western  Maryland  was  built  through  from  Cumberland, 
Md.,  to  a  connection  at  Connellsville  with  the  Pittsbiu^h  &  Lake  Erie  (New  York 
Central).    But  the  elaborate  traffic  arrangements  yielded  little  fruit.    The  Western 
Maryland  is  primarily  a  soft-coal  road,  with  an  eye  to  a  trunk  line  future.    And  the 
New  York  Central  with  its  hea^y  Pennsylvania  coal  investments  is  a  direct  com- 
petitor in  the  one  respect  as  well  as  the  other.    Moreover,  the  New  York  Central  is 
already  overwhelmingly  predominant  in  the  trunk  line  territory,  while,  as  will  appear, 
the  minor  systems  are  in  need  of  upbuilding.    These  750  miles  of  trunk  line,  there^ 
fore,  ought  to  go  elsewhere,  as  this  experimental  relationship  has  amply  demonstrated. 
The  real  question  in  case  of  the  Western  Maryland,  then,  reduces  itself  to  choice  in 
Its  disposition  between  the  Baltimore  &  Ohio  and  the  Nickel  Plate  system.    For  it 
fails  entirely  to  fit  in  with  the  Erie.    From  a  traffic  point  of  view  it  would  strengthen 
either  one.    But  then,  again,  there  is  a  legal  consideration  which  is  significant.    The 
ordinance  of  1902,  providing  for  the  sale  of  the  interest  and  claims  of  the  city  of  Balti- 
more in  the  Western  Maryland  "as  mortgagee,  guarantor,  stockholder,  creditor,  and 
lessor,"  contained  the  following  proviso  in  section  1,  paragraph  9: 

That  no  title  shall  vest  in  the  purchaser  or  purchasers  of  the  stock  of  the  Western  Maryland  Railroad 
If  sold  to  a  railroad  company  now  controlling,  owning,  or  operating  any  line  or  system  of  lines  centering' 
terminating,  or  operating  in  the  cities  of  Baltimore  or  Philadclplua,    *    ♦    ♦  ' 

This  legal  obstacle,  aiming  to  preserve  competition  at  this  port  with  the  Baltimore  & 
Ohio,  taken  in  connection  with  the  foregoing  traffic  considerations,  leads  to  the  con- 
clusion that  the  Western  Maryland  must  be  treated  otherwise  than  as  a  convenient 
supplement  to  the  Reading  and  the  Baltimore  &  Ohio.  Nevertheless  it  is  important 
that  the  Western  Maryland  be  not  pocketed  at  Baltimore  against  free  movement  to 
the  northeast.  Before  1906  the  Baltimore  &  Ohio  delivered  all  of  its  traffic  to  this 
company  at  Cherry  Run.  But  when  the  Western  Maryland  became  a  competitor  by 
westward  extension  to  Connellsville,  the  Baltimore  &  Ohio  opened  up  a  new  connec- 
tion at  the  Cumbo  yard,  dividing  its  business  through  the  interior  Reading  route 
between  the  Cumberland  Valley  (Pennsylvania  system)  and  the  Western  ^Maryland. 
Adequate  protection  through  trackage  or,  possibly,  with  the  development  of  business, 
through  the  construction  of  a  new  connecting  link  to  supplement  the  existing  lines' 
constitutes  a  detail  not  necessary  to  work  out  in  this  plan.  But  the  recommendation 
to  exclude  the  Western  Maryland  from  Baltimore  &  Ohio  control  is  final. 

A  natural  extension  of  the  Baltimore  &  Ohio,  based  upon  corporate  and  traffic 
relationships,  would  be  the  inclusion  of  the  Pere  Marquette.*  It  is  lightly  dotted  on 
map  4.  This  property  now  drastically  reorganized,  would  be  an  element  of  strength. 
Its  inclusion  would  reestablish  relationships  disrupted  by  bankruptcy.  The  two 
roads  have  direct  connection  at  Toledo,  and  operate  a  joint  passenger  service  from 
Detroit  to  Cincinnati.  The  Pere  Marquette  makes  use  at  Chicago  of  the  Baltimore  & 
Ohio  terminals,  and  there,  also,  engages  in  certain  joint  operations.  This  would  give 
the  Baltimore  &  Ohio  access  freely  to  a  Michigan  ferry  route,  and  an  outlet  to  the 
northwest  for  its  soft  coal.  But,  after  due  consideration,  as  elsewhere  discussed,  it 
has  appeared  best  to  constitute  an  independent  group  of  all  of  these  Michigan  proper- 
ties, rather  than  to  tie  them  up  one  by  one  to  the  five  trunk  line  systems,  permitting 
each  one  a  line  to  the  northwest  by  itself.  The  Baltimore  &  Ohio  has  no  need  of  the 
Pere  Marquette,  if  such  action  be  taken.  It  does  not  seek  preferred  treatment  in  the 
peninsula,  but  should  be  protected  against  a  closure  of  these  ferry  routes  if  the  avail- 
able lines  are  parceled  out  to  others. 

63  I.  C.  C.     . 


.r 


The  Erie  is  the  fourth  stem  upon  which  it  is  attempted  to  construct  a  reasonably 
comprehensive  trunk  line  system.    It  is  depicted  on  map  5.    As  an  instrument  for 
transportation  it  now  possesses  many  admirable  qualities.    Large  sums  have  been 
■expended  in  the  reduction  of  its  grades  and  in  straightening  its  main  line  until  it  is 
•competent  to  handle  a  large  volume  of  business.    In  1917  its  revenue  ton-miles 
amounted  to  10,489,516,000  as  compared  with  17,391,149,000  for  the  Baltimore  &  Ohio. 
Its  business,  thus  measured,  was  considerably  more  than  one-third  of  that  of  the  New 
York  Central  system,  and  more  than  one-quarter  of  that  of  the  entire  Pennsylvania 
system  in  1917.    This  record  was  made  despite  entire  inadequacy  of  branches  and 
feeders,  and  the  fact  that  it  enjoyed  no  access  to  profitable  traffic  along  the  lake  front 
■or  in  the  interior  coal  fields.    It  has  stood  alone,  dependent  largely  upon  through 
business.    Its  location  almost  seems  to  avoid  the  great  cities  or  interior  porte.    The 
outstanding  financial  defect  of  the  Erie  is  its  enormous  capitalization  and  book  in- 
vestment in  road  and  equipment.    This  investment  on  its  books  for  1917  was  |209,718 
per  mile  of  line,  as  against  only  $170,000  for  the  New  York  Central  and  $153,000  for 
the  Pennsylvania  lines  west.    But,  on  the  other  hand,  its  railway  operating  revenue 
per  mile  of  line  in  1917  was  $35,319,  as  against  a  corresponding  figure  for  the  New 
York  Central  of  $39,285,  and  for  the  Pennsylvania  lines  west  of  $41,175.    Evidently 
the  business  is  there.    The  main-line  machine  is  prepared  to  function.    The  problem 
for  the  Erie  is  twofold:  First,  to  readjust  its  capital  to  its  physical  investment;  and, 
secondly,  to  develop  feeders  and  necessary  entrances  to  new  territory.    To  extend 
and  round  it  out,  and,  particularly,  to  let  it  into  steel  and  coal  territory,  is  the  im- 
portant need.    But  no  such  additions  conceivably  could  offset  the  need  of  a  thorough- 
going modern  financial  reorganization,  which  shall  bring  the  total  of  outstanding 
securities  into  consonance  with  the  actual  investment,  and  which  shall  also  reduce 
the  proportion  of  bonded  indebtedness,  bringing  the  fixed  charges  down  to  a  point 
well  within  normal  earnings.    This  would  permit  also  financing  in  future  by  the 
issuance  of  stock  rather  than  through  continual  reliance  upon  borrowing. 

To  round  out  and  strengthen  the  Erie,  the  following  additions  are  proposed.  "Each 
one  is  shown  on  map  5  by  distinctive  lines.  On  the  east,  the  Delaware  &  Hudson  is 
a  valuable  adjunct  to  the  Erie  group,  in  its  line  between  Albany  and  Binghamton. 
This  affords  an  outlet  to  northern  New  England,  independent  of  the  Poughkeepsie 
bridge  route.  (Map  6.)  The  Delaware  &  Hudson  lines  north  of  the  Mohawk  Valley 
probably  add  no  strength,  and  might  be  more  ser\dceable  to  the  New  York  Central  in 
place  of  the  Rutland,  in  case  the  Rutland  were  included  in  the  New  England  group. 
But  from  Albany  south  the  Delaware  &  Hudson  surely  adds  strength.  The  line 
eouth  of  Binghamton  into  the  coal  region  is  intimately  associated  with  the  Erie 
physically.    It  fits  in  well,  but,  on  the  other  hand,  would  develop  no  new  traffic. 

The  New  York,  Ontario  &  Western  is  controlled  by  the  New  York,  New  Haven  & 
Hartford  Raihoad  Company  through  ownership  of  a  majority  of  its  common  stock. 
This  property  was  acquired  in  1904,  rather  by  indirection  than  otherwise,  ostensibly 
in  order  to  afford  access  to  the  anthracite  coal  fields.  It  was  also  important  to  establish 
contact  with  many  trunk  lines  and  the  great  lakes,  in  order,  as  it  was  hoped,  to  favor- 
ably affect  the  division  of  through  rates  by  the  New  Haven  road.  Apparently  the 
Lehigh  &  Hudson  was  first  sought  for  these  purposes;  but  financial  opposition  in  New 
York  rendered  its  purchase  impossible;  so  that  the  Ontario  &  Western  was  taken  as  a 
second  choice.*  The  location  in  its  relation  to  the  New  Haven  is  shown  on  map  8. 
It  has  never  been  serxdceable  or  profitable  in  any  substantial  way  to  its  purchaser, 
and  various  attempts  have  been  made  to  dispose  of  it.    Its  coal  properties  are  ap- 


*  Cf.  I.  C.  C.  evidence  on  New  Haven  affairs,  reprinted  as  U.  S.  Senate  document  543,  vol.  1,  July  13, 1914. 
63  I.  C.  C. 


496 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


( 


lit 


proachins:  exhaustion,  probably  ha^^n^  a  life  not  exceeding  20  years.''  Its  principal 
asset  remaining  is  a  long-time  and  very  favorable  contract  for  the  nse  of  the  Weehawken 
terminals  of  the  West  Shore  Railroad.  Possibly  in  connection  with  this  situation  the 
New  York  Central  in  1911  applied  for  permission  to  acquire  the  New  Haven  holdings; 
but  the  application  was  refused  on  the  ground  that  the  transfer  of  a  bare  majority  of 
the  stock  might  jeopardize  minority  holders.  (3  N.  Y.  P.  S.  Com.  2d  D.  261.)  The 
following  year  the  New  Haven  applied  for  permission  to  acquire  the  minority  stock 
but  in  1913  withdrew  its  application.  These  proceedings  indicate  a  present  or  pros- 
pective interest  of  the  New  York  Centj^l  in  this  little  property;  but,  as  repeatedly 
stated,  it  is  believed  that  the  New  York  Central  is  already  large  enough.  A  more 
satisfactory  use  of  the  Ontario  &  Western  would  seem  to  be  its  consolidation  with 
the  Erie-Delaware  &  Hudson  system,  for  s\ich  merger  would  considerably  amplify 
the  Erie  terminals  at  New  York,  under  the  contract,  above  mentioned,  for  tlie  use  of 
the  West  Shore  yards  at  Weehawken.  Furthermore,  the  Ontario  cuts  at  right  angles 
across  the  main  hne  of  the  Delaware  &  Hudson,  and  would  bring  its  traffic  directly 
down  to  New  York,  thereby  relieving  the  main  stem  of  the  Erie.  This  transfer  from 
the  New  Haven  might  also  afford  funds  with  which  the  New  Haven  might  engage  in 
the  Lehigh  &  New  England  extension,  elsewhere  described. 

The  Erie  is  also  fundamentally  strengthened  by  consolidation  with  the  Lehigh 
Valley  Railroad.  This  adds  an  important  coal  traffic;  and  the  many  ramifications 
through  New  York  and  Pennsylvania  would  materially  contribute  to  a  strong  tnmk 
Hne.  This  road,  fiu-thermore,  being  geographically  based  upon  Philadelphia,  through 
Reading  trackage,  rather  than  upon  New  York,  woidd  both  give  and  take  traffic  from 
a  rich  industrial  field.  Extension  to  St.  I^ouis  is  afforded  through  merger  with  the 
eastern  half  of  the  Wabash.  This  gives  access  to  western  connections,  the  western 
half  of  the  Wabash  going  to  afford  an  entrance  to  the  Union  Pacific  into  St.  Louis 
(chapter  V).  The  trend  of  the  Wabash  lines  being  all  southwest-northeast,  some 
connection  from  Toledo  eastward  to  the  main  line  of  the  Erie  would  have  to  be  found 
through  trackage.  The  nearest  lake  port  is  at  Lorain,  according  to  map  5.  And  no 
specific  recommendation  in  this  regard  is  possible  at  this  time.  The  desirability  of 
such  connection  from  Toledo  southeast  to  the  main  line  is,  however,  obvious.  Whether 
the  Wabash  trackage  contract  with  the  Grand  Trunk  north  of  Lake  Erie  from  Detroit 
to  Buffalo  is  worth  retention  is  perhaps  an  open  question.  The  main  line  of  the 
Erie  lies  so  far  south  that  it  woiild  conceivably  not  rely  upon  this  route.  It  might,  if 
not  renounced,  be  more  serviceable,  perhaps,  in  the  hands  of  the  Lackawanna- Nickel 
Plate  system.  But,  having  in  mind  the  far-distant  future,  the  desirability  of  per- 
petuation of  this  foreign  line  as  part  of  an  Erie  system  is  open  to  question. 

As  to  Erie  participation  in  Pittsburgh  business,  it  now  has  a  trackage  contract  with 
the  Pittsburgh  &  Lake  Erie  (New  York  Central)  which  permits  it  to  solicit  business. 
It  also  operates  passenger  trains.  And  it  prorates  under  this  contract  on  the  same 
basis  as  the  New  York  i'entral.  But  the  arrangement  is  unsatisfactory,  especially  in 
times  of  congestion.-  when  the  New  York  Central  naturally  favors  its  own  property, 
and,  of  course,  it  is  at  best  only  a  westward  outlet.  At  present  the  Erie  has  a  leased 
line  only  as  far  as  New  Castle.  It  is  proposed  to  strengthen  the  Erie  financially  and 
to  give  it  first-class  access  to  Pittsburgh  by  a.ssignment  of  the  Pittsburg,  Bessemer 
&  Lake  Erie  to  this  sj'stem.  This  railroad  is  shown  on  map  5.  It  is  entirely  owned 
and  operated  at  present  by  the  United  States  Steel  Corporation.  And  a  most  im- 
portant point  to  determine  at  the  outset  is  as  to  whether  this  industrial  railroad  shall 


•  Report  Massachusetts  Public  Service  Commission  relative  to  New  York,  Now  Haven  &  Hartford 
Railroad,  etc.,  1916;  House  Reports  No.  1900,  page  28.  "The  Commission  finds  itself  unable  to  disco\er 
that  the  New  York,  Ontario  &  Western  has  at  the  present  time  any  important  relation  to  the  New  Haven 
system  or  that  the  severance  of  the  control  would  be  of  disadvantage  to  the  public." 

63 1.  C.  C. 


CONSOLIDATION   OF   RAILROADS. 


497 


be  treated  as  a  common  carrier,  like  all  the  rest,  or  whether  it  is  in  effect  a  plant 
facility  or  appurtenance  of  the  steel  corporation.  In  the  latter  case  the  Bessemer  road 
should  be  left  out  of  consideration  in  this  general  consolidation  plan. 

The  business  of  the  Bessemer  &  Lake  Erie  consists  almost  exclusively  of  the  carriage 
of  ore  in  solid  trainloads  from  the  Lake  Erie  water  front  to  the  plants  of  the  steel  cor- 
poration and,  in  the  return  direction,  of  the  carriage  of  coal,  almost  entirely  of  local 
origin,  northbound.  The  tonnage  for  1920,  December  tonnage  approximated,  is  classi- 
fied in  the  following  table: 


Classification. 


Local  delivery., 
To  connections. 


United  States  Steel  Corporation  tonnage. 
Other  tonnage 


Tonnage. 


Toru. 
12,932,000 
5,339,000 


Local  origin  (north  of  North  Bessemer) . 
All  other  sources 


Total  tonnage . 


7,739,000 
10,532,000 


4,842,000 
13,429,000 


18,271,000 


According  to  this  evidence  about  43  per  cent  of  the  tonuage  L^  for  the  steel  corporation 
but  the  remaining  60  per  cent  consists  of  coal  tonnage  northbound  and  such  ore  carried 
south  as  is  transported  for  the  account  of  the  general  pubUc.  The  Bessemer  &  Lake 
Erie  has  developed  a  remarkable  balance  of  traffic  in  either  direction,  enabling  it  to 
operate  efficiently,  only  by  the  admittance  of  outsiders  to  the  use  of  its  property. 
It  IS  far  from  being  the  sole  reliance  of  the  steel  corporation,  as  it  transports  only  about 
<me-half  of  the  total  requirements  for  ore  of  this  corporation.  And,  of  course,  most 
of  the  finished  products  of  the  steel  corporation  move  out  over  other  lines.  In  other 
words,  about  85  per  cent  oi  the  Bessemer  traffic  is  coal  or  ore.  The  Bessemer  is 
undoubtedly  a  common  carrier.  It  has  been  repeatedly  so  held  by  decisions  of  the 
Interstate  Commerce  Commission;  55  I.  C.  C,  353;  and  57  idem,  513.  As  such  it 
ought  to  be  included  in  this  plan. 

The  contention  of  the  steel  corporation  that  the  Bessemer  is  a  plant  facility  alone 
IS  not  as  convincing  as  the  reasons  which  are  put  forward  to  show  that  the  Bessemer 
would  be  of  less  value  in  any  outside  railroad  system  than  it  now  is  to  its  present 
ownen^.    This  latter  allegation  haa  much  force.    So  large  a  share  of  the  business  is 
low-grade  and  is  shuttled  back  and  forth  from  the  lake  to  Httsbui^h  that  it  is  almost 
exclusively  local.    Such  traffic  would  hardly  benefit  a  trunk  line  at  all.    Furthermore 
It  IS  alleged  that  this  business,  now  so  lucrative,  of  the  carriage  of  ore  for  the  steel  cor- 
poration, would  cease  to  be  concentrated  upon  this  line  were  its  ownership  by  the  "teel 
corporation  to  be  lost.    Thus  its  phenomenal  success  financially  would  disappear 
and  the  high  price  which  must  be  paid  for  it,  ba^ed  upon  present  earnings,  would  not 
be  supported  by  the  returns.    Furthermore,  it  is  alleged  by  the  steel  corporation 
that  the  Bessemer  does  not  actually  afford  an  entrance  to  Pittsbui^h.     Its  southern 
terminal  is  I^  orth  Bessemer,  15  miles  outeide  the  city.    It  could  not  be  extended  into 
the  city  for  manufacturing  districts  independently,  on  account  of  topographical 
conditions.     Its  present  access  is  all  over  the  rails  of  the  Union  Railroad,  which  aL^o 
is  a  common  carrier,*  but  which,  while  serving  all  the  Steel  corporation  mills,  is  impos- 
.^ible  of  connection  topographically  with  most  of  the  other  lai^e  plants.    TMs  again 
the  steel  corporation  contends,  is  an  element  of  weakness  under  any  other  ownership' 
inasmuch  as  busmess  lost  to  the  steel  corporation  could  not  be  recouped  from  Jone>.  & 
Laughlm  or  any  of  the  other  great  nulls,  on  either  of  the  other  terminal  railroads 
the  Montour  or  the  Monongahela  Connecting  Railroad.  ' 


ft  I 


'  A«  stich,  authorized  by  the  Commission  in  1919  to  make  joint  through  rates. 
(V3  I.  C.  C. 


498 


INTERSTATE  COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION   OF   RAILROADS. 


499 


On  the  other  hand,  decisive  evidence  in  favor  of  railroad  rather  than  industrial 
control  of  this  important  common  carrier  is  adduced.  There  is,  first,  the  outstanding 
fact  that  60  per  cent  of  its  total  traffic  is  for  common  public  account.  The  road  was 
built  by  the  Carnegie  Company  originally  as  a  "  pacemaker  "  for  rates.  The  Bessemer 
tariffs  ,  it  is  alleged  universally  by  the  best  raibx)ad  executive  authority,  have  tended 
to  maintain  coal  and  ore  rates  below  a  fair  standard  of  remuneration.  The  extraordi- 
nary efficiency  of  this  property  in  operation,  particularly  its  enormous  trainloads  and 
evenly  balanced  traffic,  can  hardly  be  matched  by  its  competitors.  The  continued 
possession  of  this  road  gives  the  steel  corporation  an  undoubted  advantage  in  cost  of 
production  over  all  of  its  competitors,  inducing  them  to  attempt  with  their  several 
carriers,  all  of  which  are  public,  to  give  rates  which  are  hardly  remunerative.  The 
days  of  rebating,  in  which  the  Carnegie  and  other  steel  corporations  were  notorious, 
are,  it  is  hoped,  over;  but  the  pressure  of  great  corporations  for  rates  which  are  not 
fairly  remunerative  is  unquestionably  much  strengthened  by  the  continued  posses- 
sion of  this  property  by  the  steel  corporation.  If  the  commodities  clause  excludes 
railroads  from  the  conduct  of  industry,  the  Congress  ought  logically  and  fairly  to 
exclude  manufacturing  industry  from  participation  in  conducting  railroads.  If 
legislation  be  necessary  to  bring  about  this  result,  it  should  be  had  in  the  interest  of 
stability  and  rehabilitation  of  the  American  railway  net. 

The  contention  that  the  Bessemer  might  speedily  starve  if  transferred  from  it» 
present  ownership,  may  be  met  by  the  consideration  that  diversion  of  the  steel  corpora- 
tion's tonnage  would  affect  at  the  outset  only  40  per  cent  of  its  business,  and  that  this 
might  be  in  part  made  up  by  traffic  from  other  sources.  Much  depends  lipon  the 
development  of  more  nearly  unified  terminal  operation  arouind  Pittsburgh.  The 
present  condition  of  complete  separation,  physically,  between  the  several  belt  rail- 
roads ought  to  be  taken  in  hand  by  the  city  of  Pittsburgh,  and  the  development 
of  a  belt  line  by  joining  the  Union  Railroad  with  the  Montour  Railroad  would  con- 
tribute substantially  to  this  end.  The  abandonment  of  the  Bessemer  by  the  steel 
corporation  for  its  ore  carriage  is  a  threat  which  would  be  costly  to  put  into  effect. 
There  is  already  congestion  by  other  routes,  and  it  is  hardly  conceivable  that  they 
would  stand  the  overloading  which  this  shift  would  bring  about. 

All  told,  it  appears  not  only  that  the  other  common  carriers  strongly  desire  inclusion 
of  the  Bessemer  under  railroad  ownership  and  management,  but  also  that  great  com- 
petitive steel  operators  would  welcome  the  same  change.  It  would  tend  to  balance 
up  transportation  conditions  and  to  put  an  end  to  a  peculiar  competitive  advantage 
which  the  steel  corporation  enjoys.  In  case  of  such  transfer  to  railroad  ownership,  it 
is  equally  clear  that  the  natiural  affiliation  is  with  the  Erie  rather  than  any  other 
property.  The  two  roads  now  have  a  short  mileage  in  common.  They  exchange 
some  business.  And  there  is  important  conmiunity  of  interest  through  the  banking^ 
house  of  J.  P.  Morgan  &  Co.  This  common  control,  otherwise  possibly  threatening 
an  extension  of  industrial  influence  to  cover  an  entire  trunk  line  system,  is,  however, 
happily  now  subject  to  administrative  supervision  and  regulation  by  law. 

The  Erie  system,  obviously,  should  be  admitted  by  means  of  trackage  to  the  great 
railroad  centers  of  Indianapolis  and  Columbus.  No  choice  is  made,  however,  as  to- 
the  particular  lines  to  be  employed  for  this  purpose.  But  it  is  believed  that  the 
device  of  trackage,  where  lines  are  not  otherwise  congested,  and  especially  where 
they  are  already  double  tracked^will  afford  compliance  with  many  such  requirements. 

It  is  important  that  the  Erie  have  more  soft-coal  tonnage.  The  two  small  prop- 
erties, Pittsburg,  Shawmut  &  Northern,  and  the  Pittsburg  &  Shawmut,  connect 
with  difficulty,  to  be  sure,  by  heavy  grades  and  even  switchbacks.  But  the  same  is 
true  of  any  connection  yet  free  for  allocation  north  and  east  out  of  the  Clearfield 
region.  The  Buffalo,  Rochester  &  Pittsburgh  has  already,  it  will  be  recalled,  been 
assigned  to  the  Nickel  Plate  system;  and  all  of  the  other  three  trunk  lines  are  already 

63Laa 


richly  provisioned  with  soft  coal.  The  Erie's  crying  need  for  company  fuel  com- 
mends this  disposition,  despite  the  physical  obstacles  to  be  overcome,  as  well  as  the 
necessitous  condition  of  these  little  properties.  They  contribute  coal  even  if  they 
fail  to  add  revenue. 

Finally,  the  main  stem  of  a  fifth  trunk  line  is  found  in  the  New  York,  Chicago  & 
St.  Louis— commonly  known  as  the  Nickel  Plate— which  closely  parallels  the  Lake 
Shore  from  Buffalo  all  the  way  to  Chicago.  This  location  is  shown  in  detail  on  map  6 . 
The  Nickel  Plate  in  itself  is  not  a  great  raih-oad.  In  1917  it  operated  only  523  miles 
and  owned  less  than  500  miles  of  line.  Most  of  this  is  single  track.  Its  investment 
in  road  and  equipment  in  1917  stood  at  $67,470,000,  and  its  railway  operating  revenue 
for  that  year  was  $16,901,000.  Its  gross  business  amounted  to  2,615,524,000  revenue 
ton-miles.  Originally  built  in  order  to  blackjack  the  Lake  Shore  into  its  purchase, 
this  little  property  has  only  recently  been  sold  by  the  New  York  Central  system. 
Ite  complete  independence  is  perhaps  not  as  yet  fully  assured;  but  there  can  be  no 
question  that  it  possesses  in  its  strategic  location  an  importance  which  entitles  it  to 
development  as  a  competitive  stem  with  the  other  trunk  lines. 

The  Nickel  Plate  at  the  present  time  has  neither  a  line  of  its  own  to  St.  Louis  nor 
extension  to  the  Atlantic  seaboard.    At  Buffalo  it  is  dependent  for  such  share  of 
trunk  line  traffic  as  it  can  win  in  competition  from  a  number  of  independent  com- 
panies entering  Buffalo  from  the  east.    Among  these  independent  companies,  based 
upon  New  York,  the  Delaware,  Lackawanna  &  Western  stands  i*eeminent.     It 
affords  absolutely  a  first-class  trunk  line,  constructed  at  enormous  cost,  with  every 
possible  facility  for  safety  and  dispatch.    And  the  Lackawanna,  furthermore,  is  one 
of  the  strongest  companies  financially  in  the  United  States.    Apparently  the  natural 
interrelationship  between  these  two  properties  has  induced  consideration  not  infre- 
quently of  absorption  of  the  Nickel  Plate  by  the  Lackawanna.    The  obstacle  has  been 
the  evident  necessity  of  very  great  expenditure  upon  the  Nickel  Plate  line  in  order 
to  bring  it  up  to  Lackawanna  standard.    The  Nickel  Plate  has  no  feeders,  and  but 
little  access  toimportant  cities,  even  just  off  its  main  line.    At  Cleveland,  however 
it  possesses  fine  terminals.    The  expense  alone  for  the  aboUtion  of  grade  crossings  to 
the  Lake  Shore  standard  would  be  enormous.    But  there  can  be  Uttle  question  that 
with  the  growth  of  future  years  this  low-grade  direct  line  through  the  heart  of  the 
trunk  line  territory  will  be  needed  in  the  public  interest.    The  preeminent  financial 
strength  of  the  Lackawanna  would  appear  naturally  to  be  most  serviceably  employed 
in  the  creation  of  a  new  system,  just  where  it  is  most  likely  to  be  of  advantage  in  the 
course  of  time. 

The  natural  extension  to  St.  Louis  of  the  Nickel  Plate  stem,  based  upon  existing 
traffic  relationships  as  well  as  geography,  is  the  Toledo,  St.  Louis  &  Western,  otherwise 
known  as  the  Clover  Leaf  (map  6) .  This  road  crosses  the  Nickel  Plate  at  Continental, 
a  Uttle  southwest  of  Toledo,  and  runs  directly  to  St.  Louis.  It  also  is  nothing  but  a 
stem,  with  no  branches  or  feeders;  but  it  also  runs  up  to  Detroit  (Detroit  &  Toledo 
Shore  Line  Railroad,  one-half  owned  by  the  Grand  Trunk  Western),  and  its  strength 
arises  in  part  from  the  fact  that  it  cuts  across  every  east-and-west  line  of  importance  in 
central  freight  association  territory.  Adequate  feeders  at  the  western  end  are  also  pro- 
vided by  adding  the  Lake  Erie  &  Western  Unes.  These  are  withdrawn  from  the  New 
York  Central  system,  as  abeady  described,  the  Lake  Shore  having  in  1899  acquired 
a  controlUng  interest  in  its  stock.  But  the  Lake  Erie  &  Western  for  the  most  part 
appears  to  be  superfluous  to  the  New  York  Central;  that  is  to  say,  except  for  the  north- 
and-south  branches  between  Cincinnati  and  Jackson.  The  other  Unes  all  paraUel 
existing  New  York  Central  routes.  And  it  seems  to  be  generally  understood  that  the 
purpose  of  acquiring  this  Une  in  1899  was  to  put  it  out  of  harm's  way.  In  the  New  York 
Central  system  it  has  never  functioned  successfully.  Thus  transferred  and  made  part 
of  a  new  group,  it  might  perform  valuable  sendee.    The  Lake  Erie  &  Western,  also 

63 1.  C.  C. 


500  IXTEKSTATE   (JOIIMEBCE  COMMISSION   KEPORTS. 

w^Hr^und  C Jeir  *^'  I'-'^»-°-  r*^"'  -•»  ^-^  'or  a  cozmection  with  the 
m"S  cItS    ^-    '•  """"^  ""'""•'^  ""'  IndianapoUs  and  to  the  great  lakes  at 

Cohuubus^  accordiug  to  this  plan,  is  reached  over  the  Marysv-iUe  division  of  the 
Toledo  4  Ohio  Central;  and  east  of  Col,unb,.  the  Une  passes  on  by  conZed  let 
^  on  Ae  same  road  to  the  Zanesnlle  &  Western.    Through  this  property  phv^ca 
connection  ,s  had  with  the  Wheeling  &  I,ake  Erie,  as  shown  on  map  e^he  Norther 

E^e  *  wT         *^''  -H""-  ^''""°"  *  Younsstown,  imtil  recenfiy  part  of  fhe  l4" 
Ene&  Western,  are^o  Uttle  properties  now  in  independent  han<i,Wer  y  l«^d 

Mn^        OK  ""  *  Y't.™-    '^^'^  ™"»<'^'  "'^'Ph^.  0°  the  Clove   LeTf  UnV^h 

nftle^h    Plate-Lackawanna  system,  it  appea,,  that  their  inclusion  therein  is  opTn 
to  htae  objection.    No  great  traffic  centeis.  except  Akron  are  served-  h,,t  »  J^ 

vement^tieWeenotherwiseseparatedpartsoftMsUmTo^Wb:^^^^^^^^^^ 
,.If?  Lack^wanna-Nickel  Plato,  in  order  to  compete  successfullv,  must  l^ve  acctss 

n^i  .T.T-^"^  ""  *'"'  '^^ '™"  ""'^  »*«<''  <Ji»'^<-t  around  Kttebu^r  tS 
need  IS  satisfied  by  inclusion  in  the  system  of  the  Wheeling  &  Lake  Erie  Ihe  K^ 
buiKh  &  West  Virginia,  and  the  Western  Marvland  (mat)  6^     The  fi,,7^f\ 

would  be  necessary  to  reach  Ptttsbuigh.    And  then  from  KttebiU  to  cXlIs^^i? 
another  short  piece  of  constniction  through  not  difficult  territorv.  i^lt  apZ^  w^U 
comp  ete  a  direct  route  to  the  third  greatest  port  in  the  United  Stat«,     Hans  Ztte 
complete  development  formed  a  part  of  the  ambitious  scheme  of  the  old  Go!  ^ 
confanental  combination.    But  on  a  more  businessUke  footing,  and  appTrenlv  3, 
amp^e  financial  spooso^hip  they  were  ,o^aved  in  1916.    The  best  tecE  'CiS 
declare  this  relationship  to  be  nat-iral  and  necessary.    It  relieves  the  Western  Af^™ 
land.  a.  present  hemmed  in  on  all  sides  by  powerfufsvstems.  Tnd  it  woiSordl^" 
opportunity  to  utiU.e  a  good  and  direct  stem  through  the  mount^nJ  ^ilf,!«„      ^ 

aitording  competition,  of  course,  with  the  BaltimoreAOhrTdsTwhSve^^^^^^^^ 
H^sT^"  to  the  northeast  acr,«s  the  Reading  system,  along  the  dTte^ne iffh 

The  importance  to  the  port  of  Baltimore  of  tiie  constitution  of  a  new  through  route 
by  the  umpn  of  tiiese  properties  in  the  Lackawanna-Nickel  Plate  svstem  Hbv^^.f 
Great  development  of  that  port,  especially  for  the  export  of  grain.  hit^Tu  "ed  d^^ 
the  last  la  years.  Low-gra<le  products  have  been  crowded  out  of  the  twoZtr^S 
of  New  York  and  Philadelphia,  to  the  north.  Duringthewar  esnecilnv^^.h^ 
portance  of  the  export  grain  traffic  indicated.    Balino  e  turri  S  'ero^dTo 

t^e.    Addition  of  the  Buffalo.  Rochester  &  Pittsbiu^h  to  this  svstem  wo^ld  stil 
further  sumulate  this  traffic.    The  soft-coal  export  of  Baltimore  is  noTnrw  to  ^l 
of  Newport  News.    The  coal  piers  of  the  Baltimore  &  Ohio  are  the  laigesTinThe  wo^ 

mrS[m::rKr„'  ""  'r^^t  "*'  "^^'"^^  "«  recogni^ng  ISe  der;  J 
ment  of  Baltimore.    Keen  competition  between  its  historic  Une  to  the  west  and  this 

:fleTe"r:'u'n^st  ^^^b  '"™"'  r  "'"'"^"""^  "' '"« »»"•    '^^^^^^o^^. 
Z  VZT^^  r  V        '■''*"'  southeast  and  west  of  Pittsburgh  was  so  obviouslv 

Z  fX^R  TT.T"'  "  "*"  ''''  ""'y  '-•'  o*  --  construction  recommenreTlv 
the  federal  Railr<»d  Admimstration.    Possibly  the  75  miles  of  new  Une  from  Mne 

to  ConnellsMlle  should  be  joint,  in  the  interest  of  the  Pennsvlvania  Te  W^^™ 

^■^^iir^rj^^^tuzi.  :s:rvertr^".:s 
^fr^i^rrreTiiSr^-"^'^^ 

63 1. 0.  C. 


CONSOLIDATION   OF  RAILROADS. 


501 


It  has  been  urgently  recommended  by  competent  antliority  that  the  proposed 
Lackawanna-Nickel  Plate  system  be  still  further  strengthened  by  inclusion  of  the 
Washington  &  Old  Dominion  Raihoad,  which  parallels  the  Potomac  River  from  the 
neighborhood  of  Winchester,  Va.,  to  Potomac  Yards  at  Alexandria.    New  construc- 
taon  of  50  miles  in  length,  parallel  to  tiie  Potomac,  would  afford  access  for  both  the 
Baltimore  &  Ohio  and  the  Western  Maryland  directly  to  Potomac  Yards,  thus  avoid- 
ing congestion  at  Washington,  D.  0.    The  concentration  of  northbound  and  south- 
bound  traffic  at  Washington  by  the  meeting  of  all  the  Unes  from  the  north  as  well  as 
tne  south,  renders  it  imperative  that  the  tunnels,  both  at  Washington  and  Baltimore 
f  ^f  ed  of  all  possible  overhead  business.    The  desirability  of  some  such  relief 
made  itself  felt  during  federal  administration,  and  was  not  satisfactorily  provided  bv 
diversion  of  traffic  to  the  Norfolk  &  Western  at  the  Hagerstown  gateway.    Decision  is 
however,  reserved  as  to  whetlier  the  Une  should  remain  in  this  group,  be  assigned  to 
the  Baltimore  &  Ohio,  or  be  treated  as  a  joint  proposal. 

The  Buffalo   Roche3ter  &  Pittsburgh  from  the  north  by  trackage  rights  over  the 
Baltimore  &  Ohio  into  Pittsburgh,  as  shown  on  map  6,  woidd  also  materially  con- 
^ibute  to  strengthen  the  Lackawanna  system.    It  is  a  sound  property,  of  not  incon- 
siderable size,  with  an  investment  in  road  and  equipment  in  1917  of  $62,000,000  and 
railway  operating  revenue  of  $14,975,000.    It  traverses  the  entire  Clearfield  coal  ierri- 
torA%  as  shown  in  detail  on  map  8.    It  would  also  contribute  a  large  volume  of  ex-lake 
gram,  destm^  to  Baltimore  for  export.    This  traffic  should  pass  to  the  Western  Mary- 
land  east  of  Pittsburgh,  avoiding  congestion  in  that  neighborhood  by  trackage,  as  indi- 
cated upon  map  6,  from  Vintondale  to  Rockwood  Junction  over  the  lines  of  the  Penn- 
sylvania and  the  Baltimore  &  Ohio.    At  the  north  end,  also,  the  Buffalo,  Rochester  & 
Pittsbiu-gh  fits  ^ther  well  into  the  Lackawanna-the  matter  of  its  acquisition  having 
been  considered  at  various  times.    The  advantage  to  the  Lackawanna  would  be  to 
assure  a  locomotive-fuel  supply,  and  also  to  provide  its  industries  with  a  better  quaUty 
of  soft  coal.    The  mterchange  with  the  Lackawanna  is  now  chiefly  bituminous  coal 
1  hus  It  appears  that  the  addition  of  this  road  would  contribute  strength  both  north  and 
south.    The  only  other  disposition  herein  contemplated  is  its  possible  use  as  part  of  a 
tuel  hne  for  the  New  England  raUroads  (page  520,  infra), 

tqI!'V''1^^™^  'n*^^'""'  ^^^^  ''''  '^*^^"  for*  September,  October,  and  November, 
19.0,  for  the  so-called  Lackawanna-Nickel  Plate  system,  affording  a  comparison  with 
three  of  the  other  groups,  are  not  without  significance.  (Compare  also  official  data  for 
i»i/,  in  the  final  recapitulation;  and  the  api^ended  exhibit  1.) 

Estimated  gross  revenue,  mikage,  etc.,  for  year  based  on  data  available  since  September  1 

1920.  ' 


System. 


Delaware.  Lackawanna  &  Western  Railroad 
New  York  Clucago  &  St.  Louis  Railroad...: 
Western  Maryland  Railway ... 

Wheeling  &  Lake  Erie  Railroad  .'.".■.'; 

loledo,  St.  Louis  &  Western  Railroad 

guiT^o,  Rochester  &  Pittsburgh  Railway" 
Pittsburgh  «fe  West  Virginia  Railway.  ...:." 

Total  above  group 

Pen  nsylvania  system . .    

New  York  Central  system... 

Baltimore  &  Ohio  system 


Total  class-I  roads  in  United  States. 


Mileage 
operated. 


Ifiles. 
956.54 
575. 13 
797.86 
511.6 
454.17 
589.72 
63.23 

3,94&25 
11,340.37 
12,644.81 

5,153.59 

235,793.65 


Gross  revenue. 


$102,170,298 
33,153,648 
26,088,528 
24,717,524 
13,364,148 
29,251,338 
3,660,780 

232,406,264 
917,125,848 
778, 596, 498 
297,514,764 

7,550,016,648 


Gross 
revenue 
per  mile. 


$106,812 
57,646 
32,698 
48,314 
29,425 
49,602 
57,896 

558,863 
80,873 
61,574 
57,730 

32,019 


Average 
revenue 
per  ton- 
mile. 


13.044 
9.506 
8.476 

n.979 
9.046 
9.361 

23,309 

10. 797 
12.36 
10.95 
10.132 


Average 
haul  per 
revenue 
ton-mile. 


Miles. 
186.9 
24&8 
135.12 
108 

266.27 

167.94 

25.31 

165.31 
190.13 
165.66 
208.12 


63 1.  C.  C.  '   ' 


63763—21- 


fi 


\ 


502 


INTEKSTATE   COMMERCE   COMMISSION    REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


503 


With  approximately  4,000  miles  of  line,  it  is  of  course  much  smaller  than  the  iirst 
three  groups  in  this  territory;  but  its  gross  revenue  per  mile  of  line  is  higher  tlian  that 
of  the  present  Baltimore  &  Ohio  and  not  far  from  double  the  gross  revenue  per  mile  of 
line  of  all  class-I  roads  in  the  United  States.  The  average  revenue  per  ton-mile  also 
compares  favorably  with  the  other  existing  large  systems.  All  such  figiu-es  as  these, 
as  already  stated,  assume  no  disturbance  of  operating  cost  or  volume  of  businese 
attendant  upon  consolidation,  a  forced  assumption  but,  nevertheless,  the  only  basis 
upon  which  statistics  can  be  compiled. 

Finally  as  to  the  Lackawanna-Nickel  Plate  group,  it  appears  as  if,  after  appropriate 
reorganization  in  certain  cases,  that  lines  of  sufficient  strength  to  compete  successfully 
with  the  larger  groups  had  been  brought  together.  Some  of  the  roads  in  the  proposed 
system  are  at  present  short-hauled  by  their  large  trunk  line  competitors.  To  this 
extent  the  increase  in  the  length  of  the  average  haul  on  each  line  is  an  element  of 
advantage.  The  upbuilding  of  the  port  of  Baltimore  is  of  peculiar  national  advantage. 
The  Western  Marjdand  Railway,  it  is  said,  has  the  lowest  grade  line  eastboimd  over 
the  Allegheny  Mountains  of  any  tnmk  line  in  this  territory.  Its  0.8  per  cent  grade 
line  compares  with  about  1.25  per  cent  for  the  Pennsylvania  and  the  Baltimore  &  Ohio. 
This  is  a  fundamental  advantage  in  handling  lai^e  volumes  of  raw  material,  such  as 
grain  and  steel  products,  which  naturally  seek  the  seaboard  by  this  route. 

The  large  map  (6)  of  the  Lackawanna-Nickel  Plate  also  brings  out  the  relationship 
of  this  group  to  the  southern  New  England  railroads,  in  case  a  trunk  line  plan  for  that 
district  be  seriously  considered.  The  connection  at  present  is  by  way  of  the  Lehigh  & 
Hudson  or  the  Lehigh  &  New  England,  thence  over  the  Central  New  England  and  the 
Poughkeepsie  bridge.  Or  else,  for  freight  business  and  other  connection  from  up  the 
Hudson  River,  the  New  York,  Ontario  &  Western,  wholly  or  in  part,  might  be  fitted  in. 
It  is  now  in  New  Haven  possession  and  affords  a  convenient  link.  But  the  indirect- 
ness of  any  of  these  connections,  up  river,  is  amply  manifest  and  affords  adequate 
ground  for  rejection  of  any  alliance  of  the  Lackawanna-Nickel  Plate  group  with  the 
New  Haven  property.  This  matter  is  more  fully  discussed  in  the  chapter  on  New 
England. 

A  difficult  problem  is  that  of  the  proper  apportionment  of  the  existing  railways  in 
the  lower  Michigan  peninsula  among  the  five  trunk  line  groups.  The  significance  of 
these  railways  is  twofold.  A  rich  traffic  moves  in  and  out  of  the  southern  half  of  this 
I>eninsula,  especially  in  connection  with  the  recent  phenomenal  rise  of  the  auto- 
ihobile  industry,  and  it  is  also  extremely  important  that  free  and  direct  access  be  had 
to  the  so-called  Michigan  ferries.  These  boat  lines  across  Lake  Michigan  afford  a 
convenient  means  of  avoiding  the  congestion  about  Chicago,  besides,  of  course,  being 
far  more  direct  for  traffic  which  comes  through  Canada  from  the  east.  A  great  and 
growing  coal  tonnage  to  the  northwest  is  handled  by  this  means.  It  is  evident  that 
each  of  the  great  trunk  lines  ought  to  have  representation  in  this  territory ,  if  it  is  to 
be  divided  up — canalized,  so  to  speak.  So  long  as  the  field  is  free  and  open,  every 
cross  route  is  open  to  all  comers;  but  when  once  apportionment  begins,  it  must  be 
carried  through  logically  to  the  end. 

The  available  lines  in  the  lower  Michigan  peninsula  are  not  numerous.  Both  the 
New  York  Central  and  the  Pennsylvania  systems  have  provided  for  their  own  needs, 
as  the  large  maps  for  these  systems  indicate.  The  following  railroads  remain,  as  shown 
on  map  7  and  more  in  detail  on  map  7-a.  The  most  important  is  the  Pere  Marquette, 
also  shown  on  the  large  Baltimore  &  Ohio  map  (4),  because  of  its  historic  and  natural 
relationship  with  that  road.  It  has  connection  at  Toledo.  Its  uses  Baltimore  <&  Ohio 
terminals  at  Chicago  and  joint  passenger  service  is  maintained  to  Cincinnati.  It  is 
by  far  the  most  desirable  property  still  free,  having  been  reorganized  and  put  upon 
its  feet  substantially.    Next  to  the  Pere  Marquette,  the  most  important  raiboad  is 

63 1. 0.  C. 


constituted  of  the  Grand  Trunk  lines  west  of  the  Detroit  River.,    The  location  of  these 
18  shown  also  on  map  7.    But  it  is  open  to  question  whether  this  property  may  be 
appropriated  for  consoUdation,  at  least  without  diplomatic  procedure,  inasmuch  as  it 
now  forms  part  of  a  government-owned  Canadian  system.    Were  it  free  and  available 
some  of  Its  lines  might  be  utilized  to  good  effect,  but  most  of  them  trend  in  the  wron^ 
direction.    The  principal  ones  lead  from  Chicago  to  the  northeastern  connections  with 
the  Unes  m  Ontario  north  of  Lake  Erie.    What  the  American  systems  in  trunk  Une 
territory  need  are  connections  along  another  diagonal  toward  the  northwest  for  ferry 
connection  across  Lake  Michigan.    And  then,  finally,  there  remains  in  the  peninsula 
the  Ann  Arbor  Railroad,  which  runs  like  a  string  straight  nortl^west  from  Toledo  to 
Frankfort.    This  property  is  capable  of  supplementing  the  others  under  consoUdation 
The  only  other  property  in  Michigan  is  the  Detroit  &  Mackinac,  which  closely  parallels 
the  west  shore  of  Lake  Huron  clear  to  the  straits. 

There  are  two  possible  methods  of  treatment  of  these  Michigan  peninsula  railways 
One  is  to  divide  them  up  among  the  different  trunk  Unes,  giving  each  one  independ- 
ently access  to  this  territory  and  also  passage  to  the  lake  ferry  routes  to  the  northwest 
to  each  system.  The  other  plan  is  to  treat  these  lines  as  a  unit,  as  in  New  England 
putting  them  all  together  into  a  regional  group,  which  shaU  offer  its  facilities  freely 
on  equal  terms  of  neutraUty  to  all  comers  and  which  shall  specialize  its  services 
uithm  Itself.  As  between  these  two,  the  latter  alternative  is  chosen,  for  the  reasons 
hereafter  set  forth. 

A  valid  objection  to  parceUng  out  these  Michigan  Unes  among  the  five  trunk  Une 
groups  18  that  there  are  not  enough  good  railroads  to  go  round .    The  New  York  Central 
and  the  Pennsylvania,  as  their  maps  show,  already  have  their  own  lines  across  this 
territory.    The  former  is  richly  represented  by  the  Michigan  Centrarand  the  latter 
by  the  Grand  Rapids  &  Indiana.     Only  three  serviceable  roads  remain,  therefore 
for  satisfaction  of  the  Michigan  needs  of  the  Baltimore  &  Ohio,  the  Nickel  Plate,  and 
the  Ene  systems.    And  obviously  no  one  of  these  three  may  fairly  be  left  without 
representation.    The  difficulty  of  dividing  up,  giving  the  Pere  Marquette  to  one,  the 
Cxrand  Trunk  Unes  to  another,  and  the  Ann  Arbor  to  the  third,  is  very  great.    Quite 
possibly  the  Grand  Trunk,  as  a  foreign  government-owned  road,  might  not  be  available 
m  any  event.    That  Would  have  to  be  determined  diplomatically.    Then,  again 
many  of  its  Unes  run  in  the  wrong  direction  to  serve  the  trunk  Unes.    Those  forming 
part  of  the  routes  north  of  Lake  Erie  trend  generally  northeast.    What  is  wanted  for 
the  Lake  Michigan  ferry  routes  are  Unes  trending  northwest  from  Detroit  or  Toledo 
These  Michigan  properties  are  also  of  widely  different  extent  and  financial  strength 
The  Pere  Marquette  would,  as  now  reorganized,  be  a  real  addition  to  any  system 
but  the  Ann  Arbor  or  the  Detroit  &  Mackinac  would  be  a  liabiUty  rather  than  an 
asset.     Could  the  three  roads,  v^ith  possibly  the  Grand  Trunk,  be  put  into  a  melting 
pot  and  entirely  new  divisions  be  created,  with  a  view  to  the  needs  of  the  trunk  lines 
this  partitiomng  plan  might  be  worked  out.    But  in  order  to  avoid  dismemberment  of 
existing  corporations,  it  seems  preferable  to  adopt  the  second  choice  and  to  set  off  the 
Michigan  Unes  as  a  r^onal  unit. 

There  are  many  similarities  between  the  Michigan  peninsula  and  the  New  England 
situation  Each  has  a  long  water  frontage.  Each  has  a  rich  industrial  district  in  the 
south  with  many  junction  points,  but  in  each  case  the  population  becomes  more  sparse 
and  the  traffic  thinner  as  one  proceeds  northward.  Each  region  is  absolutely  depend- 
ent for  coal  and  many  suppUes  on  outside  connections.  And  the  ferry  routes  across 
Lake  Michigan  to  the  northwest  bear  certain  resemblances,  potentiaUy  to  the  dif- 
ferential Canadian  routes  from  New  England.  Each  is  operated  at  a  disadvantage 
against  standard  all-rail  Unes,  and  yet  each  is  important,  especially  in  times  of 
congestion,  and  each  exercises  a  certain  check  upon  the  rate  situation  as  determined  bv 

63  L  C.  C.  •  -^ 


I' 


504 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION   OF   RAILROADS. 


505 


the  standard  routes.  For  the  same  reasons,  therefore,  which  apply  in  New  England^ 
it  is  recommended  that  all  of  these  roads  be  consolidated  in  a  single  group  under  the 
leadership  of  the  Pere  Marquette.  These  lines,  with  the  Grand  Trunk  possibly  in- 
cluded as  a  foreign  government-owned  road,  will  be  available,  it  is  anticipated, 
through  gateways  at  the  south  for  all  connections.  The  provision  of  the  statute  as  to 
competition  will  be  satisfied  nominally  by  leaving  the  Pennsylvania  line — the  Grand 
Rapids  &  Indiana — and  the  Michigan  Central,  as  part  of  the  New  York  Central  system, 
as  at  present.  The  operating  advantage  of  such  consolidation  is  clear.  The  Ann  Arbor 
road,  a  single-track  bridge  line,  would  give  the  Pere  Marquette,  also  largely  a  single- 
track  road,  practically  a  double-track  system  for  the  business  from  Ludington  to  the 
various  connections  at  Toledo,  the  line  of  heavy  through  business.  The  two  roads 
have  a  common  terminal  at  Toledo  and  adjacent  yards  capable  of  joint  operation. 
Both  roads  use  the  same  track  out  of  Toledo  Yard  to  Alexis.  The  Saginaw  locomotive 
shops  would  do  for  both.  And  the  Ann  Arbor  boat  line  under  consolidation  with  the 
Pere  Marquette  could  be  much  more  effectively  operated.  The  following  table  gives 
the  carloads  interchanged  by  the  Chicago  &  North  Western  at  Manitowoc,  Wis.,  for 
four  months  preceding  February,  1921: 

Ann  Arbor.      Pere  Marquette. 

Received  by  North  Western 2,136  carloads.       4,425  carloads. 

Delivered  by  North  Western. 2,807  carloads.       5,598  carloads. 

It  is  certain  that  joint  operation  of  this  goodly  volume  of  business  would  }>e  advan- 
tageous. The  tonnage  of  the  North  Western  at  Ludington,  the  other  ierry,  is  so  heavy 
that  a  double-track  road  is  desired  to  handle  it  in  Wisconsin  Two  tracks  in  ^fichigan 
would  be  afforded  by  this  merger. 

As  to  the  Detroit  &  Mackinac,  it  is  a  natural  supplement  to  the  Pere  ^farquette, 
in  mileage,  as  well  as  in  terminals,  both  freight  and  passenger.  Whether  the  Detroit 
&  Toledo  Shore  Line,  half  owned  respectively  by  the  Grand  Trunk  and  the  Clover 
Leaf,  and  solely  devoted  to  freight  business,  could  be  spared  by  its  present  owners, 
or  developed  for  the  benefit  of  all  the  neighboring  roads,  is  as  yet  uncertain.  In  many 
ways  it  builds  in  very  well  with  this  proposed  Michigan  s>'stem. 

Another  advantage  which  renders  the  r^onal  group  treatment  attractive  to  cer- 
tain shippers  is  the  fact  that  it  contributes  somewhat  to  a  greater  independence 
from  the  trunk  lines.  A  manufacturer  in  this  territory  desiring  to  export  to  South 
America,  let  us  say,  finds  himself  exposed  to  a  strong  tendency  to  have  his  traffic 
worked  by  way  of  the  Atlantic  seaboard,  were  the  Michigan  lines  pardtioned  out 
among  the  trunk  lines.  But  organizations  like  the  Mississippi  Valley  Association,  or 
the  Southeastern  States  Association,  desirous  of  upbuilding  the  south  Atlantic  and 
Gulf  ports,  would  welcome  encouragement  to  turn  the  traffic  in  these  directions, 
provided  bottoms  at  attractive  rates  could  be  had.  This  group  treatment,  with  access 
of  its  own  to  Chicago  for  connection  with  all  of  the  through  lines  serving  these  ports, 
will,  it  is  submitted,  contribute  to  a  greater  flexioility  in  movement.  On  the  other 
hand,  the  question  must  be  facec*  as  to  the  effect  of  such  grouping  upon  rate  construc- 
tion. Unless  through  rates  were  given,  the  sum  of  locals  might  add  to  the  expense; 
and  it  would  be  particularly  imfortunate  if  the  trunk  lines  were  to  treat  either  this 
group  or  the  New  England  region  as  a  justification  for  charging  extra  verminal  expenses, 
so  to  speak.  Shippers  object  to  such  additional  terminal  charges,  fully  as  much  on 
the  ground  oi  inconvenience  and  annoyance  as  on  account  of  the  money  involved. 
They  regard  them  also  as  a  surtax.  If  the  regional  treatment  is  going  to  impose  such 
a  system  of  rates,  the  recommendation  for  this  treatment  might  be  modified.  But 
assuming  that  this  matter  were  satisfactorily  arranged,  it  is  believed  that  such  a 
group  would  be  feasible.  Suggestion  has  been  made  that  it  might  be  "fattened  up" 
by  inclusion  of  the  Michigan  Central  line  and  the  Grand  Rapids  &  Indiana.  There 
is,  perhaps,  force  in  this  contention,  as  contributing  to  entire  equality  competitively 

63LC.C. 


between  the  trimk  lines;  but  it  involves  a  rather  serious  invasion  of  the  existing 
systems  of  the  Pennsylvania  and  the  New  York  Central,  which  ought  to  be  avoided, 
if  possible.  The  Michigan  Central,  particularly,  despite  the  appearance  of  duplica- 
tion of  lines  between  Detroit  and  Chicago,  is  a  necessary  and  integral  part  of  the 
New  York  Central  system.  Without  it  the  latter  would  be  prejudiced  seriouslv  for 
Detroit  business  east,  as  map  7  plainly  shows.  The  two  roads  have  grown  cooper- 
atively. Each  is  dependent  upon  the  other  for  terminals,  and  Michigan  Central 
sponsorship  for  the  Detroit  tunnel  is  conditioned  upon  a  continued  alliance.  It 
would  be  unfair  and  economically  unwise  to  disturb  the  existing  relationship. 

The  need  of  an  independent  railroad  for  a  soft-coal  fuel  line  of  its  own  is  as  obvious 
and  imperative  for  the  Michigan  peninsula  as  it  is  for  New  England.    The  bituminous^ 
fields  of  West  Virginia,  as  described  in  chapter  III,  should  be  rendered  more  directly 
accessible  to  this  great  and  rapidly  growing  industrial  district.    To  this  end    it  is 
recommended  that  the  Detroit,  Toledo  &  Ironton  road,  shown  on  map  7,  be  incor- 
porated with  the  Pere  Marquette  and  its  fellows.    This  Uttle  property,  after  a  long, 
shady,  and  viciesitudinous  past,  has  recently  been  purchased  bv  Mr.  Henry  Ford' 
for  the  identical  purpose  above  outlined.*   Despite  its  present  broken-down  condition 
It  IS  admirably  adapted  to  serve  as  a  connecting  link  and  fuel-supply  road.    It  cuts 
the  main  stem  of  every  trunk  line.    At  the  south,  it  connects  with  the  Chesapeake  & 
Ohio,  practically  at  the  mouth  of  the  Big  Sandy  River;  and  so  forms  a  direct  route 
over  the  Clmchfield  road  to  the  southeast  (page  550,  in/rn,  and  map  9).    It  has  access 
immediately  to  Ohio  coal  fields  and  leads  naturally  to  the  best  Kentucky  and  West 
Virginia  measures.     The  Ironton  would  build  into  the  Pere  Marquette  svstem  well 
at  the  upper  end.    At  present  excluded  from  Detroit,  its  line  could  be  brought  into 
the  Fort  street  union  depot,  controlled  by  the  Pere  Marquette;  and  the  present  heaw 
switehing  interchange  with  the  Pere  Marquette  for  River  Rouge  Ford  plant  traffic 
could  be  more  effectively  operated.    The  necessity  for  heaw  capital  expenditures 
in  relocating  the  main  line  could  be  in  part  avoided  by  taking  trackage  up  the  Scioto 
Valley  from  the  Norfolk  &  Western,  here  double-tracked;  and  from  the  Cincinnati 
Hamilton  &  Dayton  as  well.    The  public  advantage  of  this  merger  appears  to  be 
unalloved. 

Closely  allied  with  the  Michigan  peninsula  roads  are  the  American  lines  through 
southern  Canada  between  Buffalo  and  Detroit.    These  are  drawn  on  map  7-a     Beside 
the  Michigan  Central,  there  are  two  of  these  lines  available  for  distribution  among 
the  trunk  Une  groups  which  could  profitably  make  use  of  this  short  cut     There  is 
the  Wabash,  consistii^  solely  of  trackage  rights  over  the  Grand  Trunk;  and  then 
in  the  second  place,  there  is  ,the  Pere  Marquette,  which  owns  a  Une  to  St.  Thomas' 
but  which  depends  upon  the  Michigan  Central  for  ti-ackage  from  that  point  east  into 
Buffalo.    What  treatment  shall  be  accorded  these  two  extraterritorial  lines?    It  is 
obvious  that  they  are  needed  as  supplementary  routes  for  the  two  trunk  line  svstems 
which   enter  Buffalo  from  the  east,  namely,  the  Erie  ana  the  Lackawanna-Nickel 
J^late.    Each  of  these  could  use  such  a  Canadian  line  bs  the  New  York  Central  utiUzes 
Its  Michigan  Central  route.    The  Baltimore  &  Ohio  and  the  Pennsylvania  both  Ue 
too  remotely  south  to  have  need  for  such  a  short  cut.    Neither  of  them  have  an  easterly 
entrance  into  Buffalo.    As  to  the  choice  in  distribution  for  the  two  Canadian  lini 
above  mentioned,  the  Wabash,  seemingly,  would  go  to  the  Erie  svstem;  as  that 
property,  ^t  of  the  Mississippi,  is  built  into  this  group  for  a  St.  Loiiis  connection. 
Ihen  the  Pere  Marquette  Canadian  line  might  either  go  to  the  Lackawanna-Nickel 
l-late  to  round  out  its  facilities;  or  else,  if  it  seems  preferable,  it  might  remain  as  a 
teeaer  attached  to  the  moependent  Michigan  group,  a^  above  outUned.   The  Canadian 
img^^tiajelijvej^i^ht  somehow  thus  be  treated  a^  a  part  of  the  trunk  lines  rather 

'  Full  history  in  RaUway  Age,  July  23, 1920,  page  143. 
63 1.  C.  C. 


506 


INTERSTATE  COMMERCE  COMMISSION  REPORTS. 


than  as  afFiliated  with  the  Michigan  peninsula  group.  For,  if  iDcludcd  in  the  penin- 
sula group,  they  would  add  to  the  temptation  to  work  this  Michigan  traffic  east  rather 
than,  when  shipa  were  available,  southward  to  the  Gulf  ports,  or  south  Atlantic  cities. 

Statistical  exhibit  2  manifests  the  possible  financial  results  of  a  regional  Michigan 
treatment.  Bearing  in  mind  that  the  normal  return  on  capital  in\  estment  for  the 
year  1917  for  the  country  at  large  was  approximately  5  per  cent,  it  is  apparent  that 
the  group  herein  proposed  is  somewhat  subnormal  in  this  regard.  But  an  advantage 
of  the  regional  treatment  is  of  course  the  possibility  of  enhancing  tlie  local  revenue 
by  an  increase  of  the  di\'ision8  of  through  rates.  It  is  hardly  conceivable  that  sub- 
stantial increases  can  be  effected  in  the  through  rates  themselves  witliout  driving 
traffic  away  from  the  ferry  routes.  But  nevertheless  some  local  rates  might  conceiv- 
ably be  increased.  The  inclusion  of  the  Michiq:an  Central,  as  will  be  observed  from 
the  figures  in  exhibit  1,  would  produce  the  ideal  result.  Its  addition  would  much 
more  than  double  the  net  operating  income  while  much  less  than  doubling  the  invest- 
ment account.  The  recommendation  has  been  indorsed  by  a  leading  trunk  line 
president  that  the  Micliigan  Central  should  be  made  the  bellwether  of  this  flock, 
and  the  desirability  of  withdrawing  it  from  the  New  York  Central,  in  view  of  the 
predominance  of  that  road  over  its  tnmk  line  neighbors  and  also  of  taking  out  the 
Grand  Rapids  &  Indiana  from  the  Pennsylvania  is  self-evident.  But,  as  already 
observed,  this  proposition  must  be  rejected  as  impracticable  and  unfair.  The  Michi- 
gan group,  if  it  stand  alone,  must  take  its  chances  of  survival.  It  is  believed  to  be 
self-sufficient. 

Two  little  properties,  the  Leliigh  &  New  England  and  the  Lehigh  &  Hudson  are 
mere  bridges  to  connect  New  England  with  all  of  the  trunk  lines  by  an  up-river 
cross-country  route.  These  properties  are  shown  by  double  lines  upon  all  the  large 
trunk  line  maps.  They  extend  from  Campbell  Uall  and  Maybrook,  respectively, 
over  into  the  Delaware  Valley  and  into  the  heart  of  tlie  anthracite  coal  territory. 
At  present  the  Lehigh  &  Hudson  is  controlled  jointly  by  five  railroads  and  a  coal 
company,  the  number  of  shares  being  indicated  by  the  accompanying  table: 

Central  Kailroad  of  New  Jersey 2,095  shares. 

Delaware,  Lackawanna  &  Western  Railroad 2, 159  shares. 

Erie  Railroad 2,093  shares. 

Lehigh  Coal  and  Navigation  Company 6,519  shares. 

Lehigh  Valley  Railroad 2,093  shares. 

Pennsylvania  Railroad 2,094  shares. 

Sundry  persons 147  shares. 

Total 17, 200  shares. 

The  Lehigh  &  New  England  is  at  present  controlled  by  the  Lehigh  Coal  &  Na\'igation 
Company,  and  is  used  by  that  company  for  the  carriage  of  its  anthracite  coal.  Its 
coal  traffic  is  competitive  with  that  which  is  mined  along  the  Reading,  Erie,  Lacka- 
wanna, Lehigh  Valley,  Central  of  New  Jersey,  and  other  anthracite  systems.  It 
does  not  reach  the  Pennsylvania  system  at  present,  a  small  gap  intervening.  And 
the  Penns\ivania  might  profitably  use  it  as  a  back  entrance  to  New  England,  unless 
it  were  to  be  merged  with  the  New  England  roads  as  a  group  for  a  fuel  line  to  Harris- 
burg.  Such,  indeed,  is  my  recommendation  (page  521,  infra).  And  as  for  the  Lehigh 
A  Hudson  it  is  believed  that  it  may  safely  remain  as  at  present,  as  ^  joint  bridge  line 
for  common  use  by  all  the  trunk  lines.  It  might  perhaps  be  owned  by  some  one  of 
them,  but  its  rails  should  be  open  to  all  alike  on  equal  terms. 

The  statistical  test  of  conformity  to  the  statute  of  this  plan  for  five  trunk  line  systems 
divides  itself  naturally  into  two  parts.  The  first  concerns  the  relative  size  of  these 
five  systems.  The  second  has  to  do  with  their  earning  capacity  as  compared  with 
one  another.  The  relative  size  of  the  five  is  depicted  in  exhibit  1,  which  sets  forth 
the  component  parts  of  each  system  and  thereafter  aggregates  them  into  five  totals 

63 1.  C.  C. 


CONSOLIDATION   OF   RAILROADS. 


507 


which  may  be  compared.  These  statistics,  it  should  be  observed,  are  to  be  interpreted 
with  all  the  reservations  already  made.  The  figures  for  the  calendar  year  1917  are 
therefore  presented  merely  as  a  rough  verification  of  the  soundness  of  the  plan.  Con- 
cerning size,  as  it  appears,  the  results  are  as  follows: 


System. 


Pennsylvania  system 

New  York  Central  system ...'. 

Baltimore  &  Ohio-Reading  system. 
Erie- Lehigh  Vallev- Wabash  system 
Lackawanna-Nickel  Plate  system.. 


Average 
mileage 
operated. 


11,276 

11,414 

8,253 

7,613 

4,879 


Revenue 
ton-miles. 


47,871,000,000 
38, 477, 000, 000 
29,118,000,000 
27,769,000,000 
16,986,000,000 


Revenue 
ton-miles 
per  mile 
operated. 


4,245,000 
3,370,000 
3,528.000 
3,648,000 
3,481,000 


These  data  bring  out  the  predominance  of  the  Pennsylvania  system,  but  they  also 
manifest  the  degree  to  which  the  three  smaller  systems  have  been  magnified  in  impor- 
tance to  a  size  more  nearly  commensurable  with  the  Pennsylvania.  Actually  the 
New  York  Central,  Baltimore  &  Ohio-Reading,  and  Erie  systems  are  brought  quite 
closely  together  as  respects  the  volume  of  traffic  handled,  in  revenue  ton-miles. 
The  Lackawanna-Nickel  Plate  is  still  relatively  about  as  much  smaller  than  this 
middle  group  of  three  systems  as  the  Pennsylvania  system  exceeds  it,  measured, 
that  is  to  say,  by  the  revenue  ton-miles.  But  the  soundest  test,  of  course,  of  the  capac- 
ity of  the  roads  as  operating  units  is  afforded  by  the  third  column,  indicatiug  density 
of  tonnage. 

The  relative  financial  magnitudes  are  depicted  by  figures  of  the  calendar  year  1917 
for  operating  revenue  and  income.    They  are  as  follows: 


System. 


Railway  operating 
revenue. 


Total. 


Per 

mile  of 

line. 


Pennsjrlvania system i  $482,220,000 

New  1  ork  Central  system i  W 121  OOO 

Baltimore  &  Ohio-Reading  system ..'.,.....,  .'\  259  492' 000 

Erie-Lehigh  Valley- Wabash  svstem •-.•-- ,      , 


Erie-Lehigh  Valley- Wabash  system 
Lackawanna-Nickel  Plate  system 


218,  539, 000 
130, 941, 000 


$42,762 
33,477 
31,442 
28,707 
26,835 


Net  operating 

income  (standwtl 

return). 


Total. 


$83,316,000 
84,453,000 
56,  412, 000 
46,902,000 
28,833,000 


Per 

milecrf 

line. 


$7,388 
7,399 
6,835 
6,161 


This  test  of  size  shows,  again,  the  rather  overwhelming  predominance  of  the  Pennsyl- 
vania system,  pecuUarly  marked  by  the  density  of  its  traffic.  This  density  when 
applied  to  its  large  mileage  produces  an  aggregate  which  it  is  impossible  to  match. 
The  closest  correspondence  again  is  between  the  three  middle  systems  in  the  table, 
the  New  York  Central,  the  Baltimore  &  Ohio-Reading,  and  the  Erie.  Still,  as  respect^ 
railway  operating  revenue  and  net  operating  income,  the  Lackawanna  is  about  as 
far  below  the  middle  group  of  three  as  the  Pennsylvania  is  above  it.  The  consideration 
of  the  figures,  not  in  total,  but  per  mile  of  line,  somewhat  corrects  this  apparent  dis- 
ability and  brings  the  five  systems  much  more  closely  together.  And  of  course  it  is 
the  net  operating  income  in  terms  of  investment  which  constitutes  the  final  test. 

The  relative  magnitudes  of  these  systems  are  also  indicated  by  the  amount  of  their 
property  as  carried  on  the  books  for  the  calendar  year  1917. 

63 1.  C.  C. 


I{ 


508 


INTERSTATE   COMMERCE   COMMISSION   KEPORTS. 


Investment  in  road  and 
equipment,  Dec.  31, 1917. 


System. 


Total. 


Pennsylvania  system ii  fi.T2.400  nnn 

New  York  Central  system ^ .\\W\\\liy.[V.:i::[::::: '     -'^^-^'"^ 

Baltimore  «t  Ohio-Reading  system 

Erie-Lehigh  Valley- Wabash  system !I"I*!!!!!!!!!!!!!.**!* 

Lackawanna-Nickel  Plate  system ^.I.i.I.'!'!!! 


1,383,012,000 

1,0©8>579,000 

1, 095, 165, 000 

656,222,000 


Per  mile 
of  line. 


1169,465 
138^787 
133,215 
162,995 
143,118 


Percentage 

relation; 
net  operat- 
ing income 
to  invest- 
ment. 


4.50 
6.11 
5.14 
4.28 
4.39 


By  this  showing  the  Pennsylvania  is  still  about  three  times  as  big  as  the  Lackawanna- 
Nickel  Plate  system,  but  the  correspondence  between  the  middle  group  of  three 
systems  is  believed  this  time  to  be  rendered  misleading  by  the  enormous  investment 
figures  for  the  Erie  Raih-oad  Company.  This  swollen  investment  account,  amounting 
for  the  Erie  Railroad  to  $210,000  per  mile  of  Une,  distorts  the  results  for  that  system 
appreciably.  Making  due  allowance  for  this  factor,  the  five  companies  range  them- 
selves in  order  from  top  to  bottom  of  the  table.  But  the  gap  between  them  is  sub- 
stantially lessened  when  the  results  are  compared  per  mile  of  line  rather  than  for  the 
total.  And,  be  it  observed,  as  repeatedly  stated,  it  is  not  total  size  but  relative 
earning  capacity  which  constitutes  the  final  test. 

Coming  finally  then  to  the  percentage  of  net  operating  income  on  investment,  the 
figures  draw  nearer  to  equality.    These  data  correct,  or  rather  eliminate,  the  element 
of  gdze;  and  are  only  distorted  by  defects,  that  is  to  say,  overstatement  of  investment. 
This  overstatement  is  probably  most  marked  for  the  Erie  system.    Consideration 
of  the  right-hand  column  of  the  above  table  shows  that  the  order  of  precedence  among 
the  five  companies  is  substantially  changed  in  terms  of  this  relationship  of  earning 
capacity  to  investment.    The  New  York  Central  system  heads  the  list  with  a  per- 
centage of  6.11.    The  Baltimore  &  Ohio  follows  with  5.14  per  cent,  exceeding  the 
Pennsylvania  with  its  percentage  of  4.50.    The  Erie  percentage  of  4.28  is  obviously 
too  low,  supposing  the  investment  to  be  overstated.    But  the  surprising  feature  of 
this  final  test,  and  one  which  it  is  believed  stamps  the  plan  as  conforming  to  the 
statute,  is  the  tendency  of  the  operating  income  in  percentage  on  investment  to  approx- 
imate the  corresponding  rate  for  the  country  as  a  whole.    This  figure  for  1917,  it  will 
be  remembered,  was  5.45;  and  the  year  1917  was  chosen  as  typical  because  this  figure 
was  what  might  be  regarded  as  a  normal  standard  under  the  statute.    The  ideal  for 
which  one  strives  is  a  rate  of  return,  of  course,  for  each  system  throughout  the  country 
which  shall  be  equal,  first,  to  the  rate  for  that  region,  and,  secondly,  for  all  the  regions 
combined.    A  truly  balanced  competitive  condition,  permitting  of  the  successful 
application  of  percentage  rate  increases  or  decreases  to  the  country  as  a  whole  or  by 
groups,  would  alone  obtain  under  such  circumstances.     It  is  futile  to  expect  more 
than  an  approximation  statistically,  but  it  is  believed  that  the  approximation  herein 
is  as  close  as  the  limitations  of  the  data  warrant. 

63 1.  C.  C. 


CONSOLIDATION    OF   KAILROADS. 


Chapter  II.— The  New  England  Region. 


509 


(ic'ographic  peculiarities  ofNew  England,  509.— Gateways  and  rail  connections (map\ 
510.— Volume  of  traffic  by  gateways  analyzed,  5l6.— Excess  of  inbound  tonnage 
and  character  of  shipments,  512.— Interchange  with  outside  companies  analyzed 
(diagram),  512. 

The  advantages  of  trunk  line  plans  outlined,  514.— Objections  to  Pennsjlvania- 
New  Haven  alliance,  515.— A  New  York  Central-Boston  &  Maine  merger  also 
objectionable,  516.— Alternative  alliance  with  Erie  and  Lackawanna-Nickel 
Plate,  517. 

The  plan  for  regional  consolidation  described,  517.— Advantages  as  respects  outside 
rtelationships,  especially  routing,  518.— Effect  upon  dealings  concerning  division 
of  through  rates,  519.— Coal  supply  and  a  possible  common  fuel  line,  519.— 
CoaBtMise  traffic  encouraged  and  Canadian  differential  lines,  519.— Proposed  fuel 
line  to  Harrisburg  by  consolidation  of  all  New  England  lines  with  I  ehigh  &  New 
England,  520.— Possible  merger  with  certain  trunk  line  coal  roads,  521.— Do- 
mestic intra-New  England  considerations,  522.— Concentration  of  local  interest 
and  responsibility,  conmiercial,  financial,  and  political,  522.— Legal  aspect  as  to 
preservation  of  competition  met,  523.— The  outstanding  objection  of  financial 
weakness,  523.— The  development  of  Boston  as  a  seaport,  524.— Final  accept- 
ance of  the  regional  plan  as  compelled  by  circumstances,  525. 

The  transportation  problem  of  New  England  as  respects  consolidation  is  unique. 
(See  map  8.)  It  is  an  economic  unit  on  the  outskirts  of  the  central  commercial  terri- 
tory of  the  United  States.  Although  intensively  developed  industrially  and  densely 
populated  all  along  the  seaboard,  its  principal  asset  is  its  ample  supplv  of  high-grade 
labor.  Its  transportation  problem,  broadly  viewed,  is  to  foster  its  manufactures  in 
three  ways;  first,  by  provision  for  the  cheapest  possible  inbound  caniage  of  raw  ma- 
tenals,  coal,  cotton,  iron,  and  steel;  secondly,  by  insuring  cheap  transportation  for 
foodstuffs  and  other  necessities  of  common  life  from  the  remote  centers  of  their  pro- 
duction; and,  thirdly,  to  make  certain  that  the  freight  rates  on  its  finished  products 
outbound,  shall  keep  them  in  the  various  markets  throughout  the  heart  of  the  United 
States,  in  the  face  of  constantly  rising  local  competition  thereabouts.  Its  density  of 
traffic,  particulariy  in  passenger  service,  is  noteworthy.  The  intricate  and  retail  char- 
acter of  much  of  its  trade  and  its  highly  specialized  manufactures  demand  a  conven- 
ient and  efficient  articulation  of  its  railway  net  at  numerous  junction  points  Its 
problem  is  so  peculiar  that  it  must  be  considered  in  somewhat  minute  detail  as  respects 
consolidation. 

The  geographical  relationships  of  rail  routings  now  available  may  best  be  considered 
first  with  reference  to  the  gateways  and  rail  connections.    These  may  be  listed  as 
follows,  the  location  being  indicated  upon  the  accompanying  map- 


Gateway. 


Harlem  River,  N.  Y.  (all  raU). 


New  York,  N.  Y. 


Carrier. 


Rail  connections. 


N.  Y.,  N.  H.  &  H. 


NewiEngland  Steamship  Com- 
pany, sound  lines. 


63 1.  C.  C. 


Pennsylvania. 
Lehigh  ^'alley. 
Central  of  New  Jersey. 
Philadelphia  &  Reading. 
Baltmiore  &  Ohio. 
Delaware,  Lackawanna  &  Western. 
Cx«astwise  steamship  lines  to  the  south. 
(Pennsylvania. 
LeJiigh  Valley. 
Central  of  New  Jersey: 
Philadelphia  <t  Reading. 
Baltimore  &  Ohio. 
Delaware,  Lackawanna  <fe  Western. 
Erie. 
,New  York,  Ontario  &  Western. 


510 


INTERSTATE   COMMERCE   COMMISSION   T.EPORTS. 


Gateway. 


ll(f  ay  brook,  N.  Y 


West  Albany,  N.Y. 


Carrier. 


N.:Y.,  N.  H.  &  H. 


Hectaankville,  N.  Y. 


IBoston  &  Albany . 


BoRton  &  Maine. 


Rail  connections. 


Rotterdam  Junction,  N.  Y. 
White  River  Junction,  Vt.. 

Ogdensburg,  N.Y 

Newport,  V  t 


Boston  &  Maine. 


I^high  Valley. 

Cpntral  of  New  Jersey. 

Pbiladel[)hia  iSc  Reading. 

Baltimore  &  Ohio. 

Delaware,  Lackawanna  &  Western. 

Erie. 

New  York,  Ontario  &  Western. 

New  York  Central. 

Delaware  &  Hudson  and  Erie. 

Delaware  &   Hudson  and   Delaware, 

Lackawanna  &  Western. 
Delaware  &  Hudson  and  Lehigh  Valley 
New  York  Central. 
Grand  Tnuik  (Central  Vermont). 
New  York  CcntPdl. 
Canadian  Pacific. 


The  best  evidence  regarding  the  relative  volumes  of  traffic,  inbound  and  out, 
through  the  various  gateways  into  New  England,  is  afforded  by  the  accompan>ing 
charts  and  statistics  as  to  car  interchange.    These  figures,  it  should  be  observed,  are 
applicable  only  to  New  England  as  a  group  of  railroads.    They  do  not  indicate  the 
loads  received  or  delivered  by  the  different  railways  for  their  own  individual  account. 
Thus  loads  received  by  the  New  Haven  may  include  cars  for  points  in  New  England 
beyond  its  system,  and  loads  delivered  by  the  New  Haven  may  include  cars  origi- 
nating  on  the  Boston  &  Maine,  but  passing  through  the  New  Ilaven  system  to  this 
pirticular  gateway.    But  considering  the  New  England  railroads  as  a  group,  this  data 
affords  a  picture  of  the  relative  volumes  of  tonnage  for  the  common  account  of  the 
region  as  a  whole  through  the  different  gateways.    Disregarding  details,  this  record 
discloses  that  the  overwhelming  preponderance  of  traffic  received  and  delivered 
passes  through  five  gateways  across  the  Harlem  or  Hudson  River.     The  most  important 
single  railroad  as  to  receipts  at  one  gateway  alone  is  the  Boston  &  Albany,  which  in 
1919  received  277,236  loaded  cars;  but  the  New  Haven  at  its  two  gateways  of  the 
Harlem  River  and  Maybrook  considerably  surpasses  it,  with  total  receipts  of  420,121 
loads  during  1919.    In  the  same  calendar  year  the  Boston  &  Maine,  through  its  two 
gateways  at  Rotterdam  Junction  and  Mechanicville,  was  in  receipt  of  261,546  loaded 
cars.    In  other  words,  as  to  receipts,  the  Boston  &  Maine  was  not  far  behind  the 
Albany,  and  both  alike  were  greatly  exceeded  as  to  inbound  loaded-car  movement 
by  the  New  Haven.    But,  as  above  stated,  we  have  no  way  of  ascertaining  how  large 
a  proportion  of  this  New  Haven  movement  inbound  from  the  west  and  south,  was  in 
iact  destined  to  the  different  individual  roads. 

63 1.  C.  C. 


Loaded  FoEK^fr  Caps 

Coming  hrlo  and  ooing  oaf  aP  Nevif  £ng/anof 

actnng  Ca/^ndar  year-  f9/9 

Showing  To^/  Gecxipfs  and  7&M/  D&/fV&yes 

itHXHjgh  a//  ffi^ewayff  wtfh  oHierihan 

New  cnQ/aind  Lmce. 


S^COO  lOOWO 


90000O 


900000 


M.C. 


I 


4t9C0O 


SPOOOO 


100000 


TBOCOe 


m 


^  uOl9Cfy  MfOffVIBd 


^Loods  D^^Wftd 


Legend 


lofat  Gsccn^oed 
Ibhat  Defivcned 


4-827 
2  5/e 

294  357 
i33  080 

326  652 
/36  883 

52  888 

24  776 

45  698 
ZZ  S&4 

474  30e 
/  89  336 

4e  127 
33  579 

1244   855 
542   764 


Abe^/^  Pfgtuntite  ejcpneoocd   in 
Rercenhge  of"  loaded  core  de/n^ervd 
"ha   Loctdod  cars  necenied 


Boston  AND  Mmn£  QJl 

Ptesfdenfh  Offhe 
Och^  t9ZO. 

0.-^763—21.    (To  foce  page  510.)    No.  1. 


Loocfed  fretghf-  eana  coming  irrh>    ancf  gdino  oiAof 
Afenr   Enghnd ,   Caf^ndar    \^r    1919 
Shotvn  graphtcally   for  ga-t^ways    whar^    morm 
^hcffy      20,000    haded    ccrro    were    reeerved     or 
deHvered.   ^Ftgurms  oontxurmd  in  o44aehttd  s-fa-fmttmt^.  ^ 

^^am     Loads  f^ec&vecf. 
wiMMa     loads    Oefiv^red. 

Numerate    re^r  -^  gai^ewayB    //9^b«/  on 
acconrTpanylng      srfa^emen^. 


Boston  &  Maine  P  P 

Presidents  Office 
Oct.   1920 


63763-21.    (To  face  page  510.)    No.  2 


CONSOLIDATION   OF   RAILROADS. 


511 


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63 1.  C.  C. 


I  '' 


512 


INTERSTATE   COMMERCE   COMMISSIOX   REPORTS. 


Loaded  and  empty  cars  interchanged  bij  New  England  carriers  icith  connecting  lines  dnrinff 

the  calendar  year  1919. 


Cars  received. 


Gars  delivered. 


New  England  railroads. 


I 


Loaded.    Empty. 


Total. 


Loaded.     Empty.      Total. 


Bangor  <t  Aroostook 4,827 

Boston  &  Albany t    294, 357 

Boston  &  Maine 326,652 

Central  Vermont i     52,888 

45,698 


Maine  Central 

New  Haven  (including  Central 

New  England) 

Rutland , 


Total  New  England. 


474,306 
46,127 


1,236 

13,911 

19, 719 

2,978 

8,156 

19,564 
5,186 


1,244,855        70,750 


6,063 

308,268 

346,371 

55,866 

53,854 

493, 870 
51,313 


2, 516 
133,080 
136,883 

24,776 
22,594 

189,336 
33,579 


2,619 

168,491 

201,055 

24,261 

29,863 

306,178 
19,226 


Percent- 
ape  re- 
lation; 

loads  de- 
livered 

to  loads 

received. 


5,135 

301, 571 

337,938 

49,037 

52,457 

495, 514 
52,805 


52 
47 


40 


1, 315, 605  i    542, 764       751, 693   1, 294, 457 


44 


There  is  a  striking  disproportion  between  inbound  and  outbound  tonnage;  the  loads 
outbound,  in  fact,  for  the  calendar  year  1919  amounting  to  only  44  per  cent  of  the  loads 
inbound.    The  nearest  approach  to  equality  at  these  live  most  important  gateways 
is  at  the  Harlem  River,  with  54  per  cent  of  loads  delivered  to  loads  received.    The 
other  gateways,  presumptively  by  a  larger  proportion  of  inbound  coal  tonnage,  mani- 
fest a  far  greater  disparity.     For  the  coal  tonnage  of  course  moves  entirely  in  one 
direction  and  is  very  large  in  volume,  aggregating  approximately  22,400,000  tons 
bituminous  tide  and  rail  in  1920.  and  somewhat  less  than  half  that  amount  of  anthra- 
cite coal.    Somewhat  over  half  the  soft  coal,  12,200.000  tons,  moved  all  rail.     It  is 
probably  for  this  reason  that  at  Maybrook  there  is  delivered  to  the  New  England  roads 
about  five  times  as  much  tonnage  as  is  moved  outbound  toward  the  west.     The  Boston 
&  Maine  at  its  two  connections  with  the  west  receives  about  three  times  as  many  loads 
as  it  delivers  westbound.    On  the  Boston  &  Albany  the  disparity  is  slightly  less. 
Financially,  of  course,  the  results  obtained  from  inbound  and  outbound  tonnage  are 
not  as  widely  different,  owing  to  the  fact  that  most  of  the  traffic  into  New  England 
consists  of  bulky  low-grade  business,  mostly  raw  materials.    Whereas  the  traffic 
delivered  is  constituted  mainly  of  high-grade  merchandise  or  manufactures,  on  which 
a  relatively  high  freight  is  paid.    It  is  this  return  current  of  high-grade  tonnage  upon 
which  the  entire  power  of  New  England  to  trade  with  its  western  connections  depends. 
It  is  a  valuable  business,  much  coveted  in  exchange;  and  the  prime  element  in  con- 
stituting a  New  England  group  of  railroads,  independent  of  trunk  line  affiliation,  is 
the  maintenance  of  its  ability  as  a  distinctive  group  of  carriers  to  distribute  this 
tonnage  among  all  western  connections,  in  such  a  manner  as  to  assure  both  preferred 
service  and  a  fair  proportion  of  the  through  rate. 

A  significant  feature  as  to  car  interchange  is  the  relatively  small  amount  of  tonnage 
which  moves  in  or  out  through  Canadian  connections  or  by  the  northern  gateways. 
Thus,  of  1,244,855  loaded  cars  received  by  New  England  as  a  group  in  1919,  only 
38,828  came  via  the  Grand  Trunk,  and  only  52,878  loads  were  received  by  the  Canadian 
Pacific.  It  is  apparent  that  the  Canadian  routes  are  important  not  as  a  main  resource 
but  rather  by  reason  of  their  potential  usefulness,  either  in  time  of  congestion  or  as  a 
check  upon  undue  rate  advances  by  the  standard  routes. 

The  relative  association  with  foreign  connections  of  the  different  New  England 
railroads  is  also  disclosed  by  the  accompanying  exhibits  of  car  interchange.  Thus  it 
appears  that  the  Pennsylvania  road  delivered  164,787  loaded  cars  to  the  New  Haven 
at  Harlem  River  in  1919,  as  against  only  85,136  loads  delivered  by  other  railroads  at 
that  same  gateway.    And  the  delivery  by  the  New  Haven  at  Harlem  River  to  the 

63I.C.C. 


CONSOLIDATION    OF   RAILROADS. 


513 


Pennsylvania  and  the  Long  Island  Railroad  was  100,403  loads  as  against  only  34,702 
loads  delivered  to  other  connections.  In  other  words,  the  Pennsylvania  had  over- 
whelming preponderance  at  this  gateway.  The  data  for  Maybrook,  which  is  the 
New  Haven's  up-river  gateway,  are  entirely  inconclusive  as  to  its  relative  affiliation 
with  the  other  trunk  lines.  In  1919,  it  received  at  Maybrook  from  the  Erie  54,868 
loads  and  delivered  only  11,253.  But  for  all  the  other  trunk  lines  it  delivered  and 
received,  not  directly,  but  through  the  Lehigh  &  New  England  and  the  Lehigh  & 
Hudson  River,  which  merely  serve  as  bridges  to  connect  with  these  other  routes. 
The  natural  affiliation  of  the  Boston  &  Maine,  based  upon  car  interchange,  is  mani- 
festly with  the  Delaware  &  Hudson  at  the  Mechanicville  gateway.  Thus  it  received 
at  Mechanicville  in  1919  from  the  Delaware  &  Hudson  about  50  per  cent  more  loaded 
cars  than  it  received  from  the  New  York  Central  at  Rotterdam  Junction  during  the 
same  period.  And  it  delivered  to  the  Delaware  &  Hudson  just  about  an  equal  pre- 
ponderance of  tonnage  as  compared  with  the  New  York  Central  connection  at  Rot- 
terdam Junction.  The  natural  relationship  of  the  Boston  &  Maine  to  the  Delaware  & 
Hudson  among  all  the  other  trunk  lines  west  of  the  Hudson  River  is  quite  evident. 
Such  an  affiliation  in  case  of  the  adoption  of  a  trunk  line  plan  for  New  England  is 
self-evident.  But,  other  than  through  emphasis  of  the  New  Haven's  heaw  inter- 
change with  the  Pennsylvania  at  the  Harlem  River  gateway,  the  evidence  as  to  New 
Haven  relationship  with  other  trunk  lines  is  inconclusive,  based  upon  this  data. 

Loaded  and  empty  cars  interchanged  by  the  Boston  <fc  Maine  Railroad  mvth  connecting 
lines  other  than  New  England,  lines  during  the  calendar  year  1919. 


Map 

No.  , 


Gatewav. 


30 
31 


32 
33 
31 


34 
35 
36 


37 
38 
36 
39 


36 


Rotterdam . 
Troy 


Total. 


Eagle  Bridge. 


Connecting 
line. 


N.Y.C.... 
...do 


D.&H.... 


Mechanicville do. 


Troy. 


.do. 


Total. 


Johnsonville G.  &  J . 

Newport C.  P. 


Cars  received. 


Loaded.  [  Empty.    Total.    Loaded. 


Cars  delivered. 


106,792 
14,276 


3,991 
1,511 


121,068  I   5,502 


2,513 

154,754 

2,455 


16 

6,900 

101 


110,783 
15,787 


35,516 
15,269 


126,570  !    50,785 


159,722  ;      7,017 


1,305 

.  27,371 

Sherbrooke do I     4,293 

Total 


2,529  i      1,434 

161,654  ;    53,112 

2,556  !    572 


166,739  I  55,118 


Berlin.: G.T. 

Groveton do. 

Sherbrooke do. 

Swanton :  .do. 


90         1,395  1      1,340 

2,474       29,845  I    25,545 

711    5,004  !    897 


31,664    3,185  |  34,849 


Total 

Sherbrooke Q.  C, 

Grand  total 


2 
624 

7,612 
179 


8,417 


1,547 

1,128 

1,032 

1 


1,549 
1,752 

8,644 
180 


3,708  I    12,125 


4,476 


217  I      4,603 


326,652 


19,719     346,371 


26,442 


167 
1,562 

882 
365 


2,976 


Empty. 


57,243 
2,127 


Total. 


59,370 


92,759 
17,396 


110,155 


124 

122,155 

1,978 


1,558 

175,267 

2,550 


Percent- 
age re- 
lation: 
loads  de- 
livered 
to  loads 
received. 


33 
107 


42 


hi 
34 
23 


124,257  j  179,375 


35 


472  I   1,812 

8,479  I  34,024 

55  i    952 


103 
93 
21 


8,534   34,976 


84 


860 

261 

1,824 

83 


1,027 
1,823 
2,706 

448 


8,350 

250 

12 

204 


3,028  I   6,004 


35 


222 


5,394    5,616 


136,883  201,055  j  337,938 


^ 


42 


63  I.  C.  C. 


1 


514 


INTERSTATE   COMMERCE   CJOMMISSTON    REPORTS. 


Load^  and  empty  cars  interchanged  by  the  New  York,  New  Haven  d:  Hartford  Railroad 
tnclyding  Central  New  England,  with  connecting  lines,  other  than  New  England  lines* 
during  the  calendar  year  1919.  * 


Map 

No. 


Gateway. 


Harlem  River. 

Maybrook 

Campbell  Hall. 


Port  Morris , 

Beacon 

Boston  Corners.. 

Brewsters 

Campbell  Hall... 


10 

11 

12 

13 
14 
15 
16 
12 

17  I  Millerton. 

18  Poughkeepsie. 
Rhinccliff 


Connecting 
line. 


19 


fPenn 

L.V 

C.N.J 

I  L.I 

I  Eric 

...j  L.&N.E. 

L.&H.R. 

...  N.Y.O.itW 


N.Y.C. 

...do... 

do.. . 

...do... 
...do... 
...do... 
...do... 
...do... 


Cars  received. 


Cars  delivered. 


Loaded. !  Empty. !  Total.    T<oaded. 


Total 

New  York  term'ls. 
Grand  total. 


.do 


155,508 
44,923 
40,213 
9,279 
54,868 
23,163 
92,167 
14,576 


2,012 

364 

1,329 

10,717 

670 

80 

772 

381 


157,520 
45,287 
41,542 
19,996 
55,538 
23,243 
92,939 
14,957 


77,662 

8,380 

26,322 

22,741 

11,253 

496 

22,005 

2,223 


Empty.    Total. 


75,772 
37,677 
12,420 
671 
58,332 
32,781 
67, 154 
8,329 


153,434 
46,057 
38,742 
23.412 
69,585 
:«,277 
89,iri9 
10,552 


Percent- 
age re- 
lation; 
leads  de- 
livered 
to  loads 
received. 


50 
1» 
6S 
245. 
21 
2 
24 
15 


17,718 

8,933 

151 

154 

2,611 

19 

1,973 

532 


1,135 

1,626 

3 

72 

76 


20 
2 


32,091  j      2,934 


7,518 


305 


18,853 

10,559 

1.54 

226 

2,687 

19 

1,993 

534 


35,025 


7,823 


474,306  I     19,564     493,870 


3.502 

5,222 

254 

210 

1,568 

6 

427 

139 


11,328 


6,926 


189,336 


8,479 

1,762 

20 

45 

1,720 

6 

458 

3 


11,981 

6,984 

274 

2.55 

3,288 

12 

885 

142 


20 
5» 

168 
136 
60 
32 
92 
26 


12,493       2:1,821 


3.5 


549 


7,475 


92 


306,178  I  495,514 


40 


Two  entirely  distinct  plans  for  consolidation  of  the  New  England  railroads  deserve 
consideration.    They  differ  radically  in  principle.    The  first,  which  may  be  desig- 
nated the  trunk  line  plan,  would  seek  to  ally  the  New  England  carriers,  individually 
or  by  subgroups,  with  important  and  financially  strong  trunk  line  8>-8tem8.    And 
such  plans  customarily  divide  this  territory-  north  and  south  of  the  Boston  &  Albany, 
leaving  that  line  undisturbed  in  the  possession  of  the  New  York  Central.    (Map  8.) 
Trunk  line  plans,  for  example,  propose  to  attach  the  New  Haven,  south  of  this  divid- 
ing line,  either  to  the  Pennsylvania,  the  Baltimore  &  Ohio,  or  the  Lackawanna- 
Nickle  Plate  sj-stems.    And  such  trunk  line  plans  coincidently  attach  the  Boston 
&  Maine,  alone  or  in  some  connection  with  the  other  roads  north  of  it,  either  to  the 
New  York  Central  system  or  to  the  one  built  upon  the  Erie.    The  argument,  theo- 
retically, in  behalf  of  the  trunk  line  plan,  is  primarily  that  the  New  England  roads 
require  the  support  and  encouragement  of  the  stronger  trunk  lines  in  order  to  main- 
tain themselves  and  their  patrons  in  this  out-of-the-way  comer  of  the  United  States. 
It  is  alleged  that  only  by  the  financial  support  of  these  trunk  lines,  by  the  traffic  which 
they  have  to  offer,  and  by  the  rate  adjustment  which  the  trunk  lines  would  tend  to 
set  up,  in  order  to  support  their  investments,  may  the  New  England  carriers  be  pro- 
tected from  insolvency.    The  soundness  of  this  argument  in  the  abstract  may  be  illus- 
trated in  many  ways.    Thus,  in  the  matter  of  equipment,  such  trunk  lines  as  the 
Pennsylvania  possess  a  surplus  of  cars  which  might  well  be  drawn  upon  to  supply 
the  deficiencies  of  New  England.    The  Pennsylvania  with  one  twenty-fifth  of  the 
railroad  mileage  of  the  country  owns  one-tenth  of  the  equipment.    Some  New  England 
lines  are  peculiarly  short  of  such  equipment,  except  perhaps  the  New  Haven  and  the 
Bangor  &  Aroostook.     Again,  New  England  suffers  by  being  chronically  a  per  diem 
debit  region.    The  resources  of  its  roads  are  drained  by  constant  and  heavy  balances 
due  to  the  holding  of  equipment  on  its  terminal  rail  lines.    These  debit  balances 
would  surely  be  reduced  were  the  ample  supply  of  equipment  of  the  stronger  trunk 

G3  I.  C.  C- 


CONSOLIDATION   OF   RAILROADS. 


515 


lines  to  be  drawn  upon.  It  is  alleged,  furthermore,  that  a  more  efficient  operation  in 
train  loading  and  movement  might  be  had  were  the  New  England  rails  to  be  physi- 
cally united  for  operation  with  those  of  the  trunk  line  stems.  General  overhead 
expenses  for  administration  might  perhaps  be  more  appropriately  distributed,  a  better 
balance  of  traffic  in  and  out  might  obtain,  and  particularly  might  the  supply  of  com- 
pany fuel  be  brought  directly  from  the  coal  fields  at  cost  were  the  New  England 
roads  to  be  attached  to  one  or  another  of  the  great  eastern  systems.  Assiu-edly  valid- 
ity attaches  to  many  of  these  arguments,  as  they  are  subsequently  discussed  in 
connection  with  the  alternative  plans.  The  essential  difficulty  in  the  trunk  line  plans, 
however,  \s  not  their  soundness  in  the  abstract  but  their  concrete  application;  that 
is  to  say,  the  particular  choice  to  be  made  for  such  affiliation  among  the  five  possible 
trunk  line  systems  set  up  under  this  plan.  Nor  may  the  choice  among  these  five 
be  made  indiscriminately.  The  trunk  lines  pair  off,  so  to  speak,  as  respects  financial 
and  operating  strength.  It  would  upset  all  balance  to  ally  the  New  Haven  with  one 
of  the  strongest  trunk  lines,  and  to  deny  to  the  Boston  &  Maine  affiliation  with  an- 
other trunk  line  equally  dominant.  It  is  at  all  times  essential  to  keep  in  mind  a  certain 
balance  of  power;  that  is  to  say,  of  competitive  strength. 

The  most  frequently  suggested  trunk  line  plan  proposes  to  incorporate  the  New 
Haven  road  in  the  Pennsylvania  system.  The  reasons  are  obvious,  consisting  of  the 
preponderance  of  traffic  interchanged  already  mentioned,  the  close  working  arrange- 
ments, the  enormous  joint  investment  in  connecting  railways  at  New  York,  and  tiie 
interlocking  stock  ownership.  But  there  are  a  number  of  substantial  objections  to 
such  consolidation.  The  foremost  one  is  the  already  preponderating  size  of  the 
Pennsylvania  system  as  a  whole,  an  objection  almost  equally  applicable  to  the  addi- 
tion of  any  other  railways  to  the  New  York  Central  group.  A  prime  object  in  effecting 
consolidation  is  to  equalize  competitive  conditions,  so  that  to  ally  a  New  England 
road  with  systems  already  so  large  as  to  betray  evidence  of  unwieldiness  would  be 
entirely  contrary  to  the  spirit  of  the  statute.  A  second  objection  to  the  Pennsyl- 
vania-New Haven  alliance  is  that  the  Pennsylvania  has  no  surplus  earning  power 
at  present  with  which  to  upbuild  a  broken-down  New  England  property— broken  by 
impairment  of  its  assets  through  unwise  investments  in  outside  properties.  But 
of  even  greater  weight  is  the  undesirability  of  further  congesting  transportation  condi- 
tions in  and  about  New  York  city.  The  entire  contact  of  the  Pennsylvania  is  through 
the  Harlem  River  or  metropolitan  gateways  and  these  are  routes  periodically  subject 
to  embargo  by  reason  of  overloading.  Such  congestion  might  of  course  be  remedied 
by  amplification  of  facilities;  but  the  expense  of  such  improvements  through  the  heart 
of  the  metropolitan  district  becomes  more  appalling  with  the  passage  of  time.  To 
set  up  a  prime  connection  which  would  throw  the  traffic  of  New  England  inevitably 
more  and  more  through  this  gateway  seems  unwise.  And  then  on  top  of  it  all,  the 
absence  or  any  present  disposition  to  consolidate,  the  Pennsylvania  having  abundant 
problems  of  its  own,  leads  one  inevitably  to  reject  this  possibility. 

What  shall  be  said  about  an  alliance  of  the  New  Haven  with  the  Lackawanna- 
Nickel  Plate  system.  The  physical  connection  between  the  two,  as  depicted  on 
map  6,  is  immediate  and  direct  through  the  Poughkeepsie  bridge  gateway.  This 
choice  would  emphasize  the  utilization  of  the  natural  all-rail  up-river  gateway.  By 
means  of  the  two  bridge  lines  of  the  Lehigh  &  Hudson  and  the  Lehigh  &  New  England 
the  New  Haven  could  assuredly  be  brought  to  a  close  connection  either  with  the 
Lackawanna  or  the  Lehigh  Valley,  and  thus  be  made  part  of  a  comprehensive  trunk 
line  system .  Such  an  alliance  has  the  added  advantage  of  avoiding  congestion  through 
the  metropolitan  district  of  New  York.  Fifty  years  from  now  it  is  believed  the  truth 
of  this  observation  will  be  far  more  apparent  than  at  the  present  time.  But  considera- 
tion of  map  6,  viewed  in  the  light  of  the  topography,  the  grades  and  curvature,  indi- 
cates that  an  enormous  investment  would  have  to  be  made  in  upbuilding  the  connect- 

G3  I.  C.  C. 


y 


516 


INTERSTATE   COMMERCE   COMMISSION   ilEPORTS. 


CONSOLIDATION   OF   RAILROADS. 


517 


I    t 


h 


ing  links;  and  even  then  the  route  to  the  west  is  markedly  indirect  as  compared  with 
the  Boston  &  Albany  and  New  York  Central  line  up  the  Mohawk  Valley.  The  Nickel 
Plate-Lackawanna  system  exists  as  yet  only  on  paper  in  a  tentative  plan.  It  is  not 
even  in  embryo.  Its  financial  stability,  if  ever  created,  must  of  necessity  for  a  long 
time  be  uncertain.  One  hesitates,  therefore,  to  commit  the  fortunes  of  the  southern 
half  of  New  England  served  almost  exclusively  by  the  New  Haven  system  to  such 
an  alliance. 

Consolidation  of  the  New  Haven  with  the  Baltimore  &  Ohio  amplified  system  as 
proposed  in  this  report  deserves  the  most  serious  consideration.    This  is  the  third 
possible  choice.    The  relationships  are  set  forth  on  map  4,  whence  it  is  evident  that 
an  extraordinary  advantage  might  accrue  to  New  England  from  such  a  merger.    The 
Philadelphia  &  Reading  and  Jersey  Central  overwhelmingly  predominate  as  anthra- 
cite coal  roads,  and  the  soft-coal  tonnage  of  the  Baltimore  &  Ohio  is  drawn  from  some 
of  the  richest  reserves  in  the  United  States.    The  bridge  lines  as  depicted  on  map  4 
admirably  connect  the  two.    Such  an  alliance  would  carry  out  in  effect  the  plan  under 
which  a  number  of  years  ago  the  Philadelphia  &  Reading  undertook  an  entrance 
into  New  England  by  acquiring  control  of  the  Boston  &  Maine  Railroad.    The  project 
then  feU  through  largely  because  of  banking  opposition.    But  the  operating  and  traffic 
advantages  then  obvious  obtain  at  the  present  time.    The  arrangement  is  far  from 
being  ideal,  however.   Many  objections  immediately  suggest  themselves.    The  first  is 
that  the  Baltimore  &  Ohio  is  from  New  England  the  longest  of  all  the  trunk  line  routes 
to  Chicago.    As  indicated  on  page  486,  the  distance  over  the  rails  of  the  Baltimore 
&  Ohio  from  New  York  to  Chics^^o  is  105  miles  greater  than  by  way  of  the  Pennsylvania. 
The  summit  to  be  surpassed  is  appreciably  higher  than  by  any  other  route  and  is 
actually  1,500  feet  higher  than  the  highest  elevation  of  the  New  York  Central  line. 
Chicago  is  a  long  way  farther  from  Boston  by  this  circuitous  route  than  by  any  other. 
But,  on  the  other  hand,  the  Baltimore  &  Ohio  leads  as  directly  as  any  other  trunk  line 
to  St.  Louis  and  the  southwest.    And  the  connection  at  Harlem  River  is  for  freight 
purposes,  owing  to  the  abundant  floating  equipment  owned  by  this  system,  almost 
as  good  as  the  Pennsylvania.    Another  serious  objection  has  to  do  with  the  future 
of  New  England  seaports.    And  the  Baltimore  &  Ohio  trunk  line  plan  unquestionably 
violates  New  England  interest  in  this  regard.    It  is  inconceivable  that  such  a  trunk 
line  should  bring  export  traffic  through  to  Boston,  passing  in  series  every  one  of  the 
other  great  Atlantic  seaports.    This  serious  disadvantage,  along  with  the  greater 
distance,  must  be  set  off  against  the  benefits  which  might  flow  from  the  cheapened 
fuel  supply.    On  the  whole,  following  out  the  principle  of  trunk  line  consolidation, 
the  Baltimore  &  Ohio  choice  is  the  most  attractive  one,  assuming  of  course  that  this 
system  has  the  financial  stamina  to  imdertake  the  task. 

Possible  trunk  line  affiliation  for  the  northern  half  of  New  England  must  now  be 
sought.  What  shall  be  done  with  the  Boston  &  Maine,  the  Maine  Central,  and  the 
Bangor  &  Aroostook?  The  baldest  proposal  is  a  consolidation  of  all  of  these  properties 
with  the  New  York  Central.  The  financial  advantage  is  obvious.  But  a  serious 
objection  is  the  size  and  preponderance  already  in  trunk  line  territory  of  this  great 
road.  To  add  to  its  great  mileage  and  enormous  volimie  of  traffic  a  network  of  over 
4,000  miles  of  line  transporting  almost  5,000,000,000  revenue  ton-miles  of  freight  is  a 
serious  proposal.  The  burden  of  proof  rests  upon  its  advocates.  A  second  serious 
objection  is  that  this  alliance  would  in  nowise  foster  competition  at  most  of  the  import- 
ant New  England  centers.  Rather  would  it  tend  to  cut  it  down.  For  the  Boston  & 
Albany,  as  a  subsidiary  of  the  New  York  Central,  already  cuts  through  the  heart 
of  New  England.  And  along  its  entire  length  there  is  now  competition  between 
the  New  York  Central  system  and  the  Boston  &  Maine,  the  latter  operating  to  the 
west  through  the  gateways  at  Mechanicville  and  Rotterdam  Junction.  Merger  of  the 
Boston  &  Maine  in  the  New  York  Central  sj'stem  would*put  an  end  to  all  this  competi- 

63 1.  C.  C. 


tion  and  limit  it  only  to  those  points  touched  by  the  New  Haven.  Massachusetts 
from  end  to  end,  instead  of  having  as  at  present  three  railroads  in  competition  with 
the  west,  would  have  but  two.  And  then,  in  the  third  place,  the  statistics  of  car 
interchange,  already  discussed,  show  that  the  Boston  &  Maine  is  substantially  closer 
to-day  to  the  Delaware  &  Hudson  than  to  the  New  York  Central,  there  being  a  pre- 
ponderance in  interchange  of  at  lea^t  50  per  cent  with  this  smaller  company  during  the 
calendar  year  1918.  Considerations,  therefore,  of  equal  weight  to  those  which  led  to 
the  rejection  of  the  Pennsylvania  Railroad  for  the  New  Haven,  impel  one  to  reject 
this  trunk  line  plan  for  the  Boston  &  Maine. 

Why  not,  then,  ally  the  Boston  &  Maine  with  the  proposed  trunk  line  system  built 
upon  the  Ene  stem.  The  result  of  such  an  alliance  is  sketched  on  map  5  The  con- 
nection IS  direct  by  way  of  the  Delaware  &  Hudson  and  much  is  to  be  said  in  favor  of 
the  arrangement.  But  here  again  the  plan  falls  short  financially.  Is  there  a  sufficient 
surplus  of  financial  resource  for  the  rehabilitetion  of  4,000  miles  of  indigent  railroad? 
Or  again,  is  there  sufficient  direct  contact  with  New  York  and  Philadelphia  and  the 
territory  to  the  southeast.  One  demurs  at  a  canalization  of  New  England  traffic 
through  the  routes  alone  depicted  on  the  map  of  the  Erie  system 

The  most  appealing  choice  under  a  trunk  line  plan  for  the  northern  half  of  New 
England  is  somewhat  complicated.    It  proposes  to  draw  upon  tJie  superabundant 
resources  of  the  New  York  Central,  and  yet  at  the  same  time  to  prevenV  extinction 
of  the  existing  competition  all  along  the  line  of  the  Boston  &  Albany.     The  proposal 
IS  this:  That  the  Boston  &  Maine  Railroad  be  consolidated  with  the  propo^d  Erie 
system  (map  5),  and  that  the  Maine  Central  and  tJie  Bangor  &  AroostookXuld  be 
consolidated  wi^  the  New  York  Central,  connection  tlierewith  being  obtained  over 
the  rails  of  the  Worcester,  Nashua  &  Portland  division  of  the  Boston  &  Maine     This 
latter  bridge  line  parallels  the  sea  coast  from  Worcester  to  Portland,  still  leaving 
the  Boston  &  Maine  undisturbed  in  possession  of  ite  two  main  stems  between  Boston 
and  Portland    The  Worcester,  Nashua  &  Portland  for  many  years  retained  its  cor- 
porate identity.    It  would  afford  a  convenient  link  to  bind  the  New  York  Central 
with  the  second  great  seaport  of  New  England.    The  railroads  of  Maine  would  thereby 
be  enabled  to  draw  upon  the  financial  resources  and  the  surplus  equipment  of  a 
wealthy  trunk  line,  and  the  development  of  Portland  as  a  seaport,  in  tJie  enjoyment 
of  cornpetition  from  three  independent  railroad  systems,  might  well  be  prorioted. 
The  Cham  of  cities  along  this  route  and  the  line  of  the  Boston  &  Albany  would  enjoy 
a  degree  of  cornpetition  which  has  not  been  witnessed  for  the  last  generation     Many 
objections  to  this  arrangement  suggest  themselves,  but  they  must  be  accounted  part 
and  parcel  of  tlie  disadvantage  of  any  trunk  line  plan.    Balancing  advantages  and 
de  ecte,  the  arrangement  seems  to  be  not  impracticable  and  to  comply  substantially 
with  the  purpose  of  the  federal  statute.    It  is  my  own  choice  for  northern  New  England 
if  a  trunk  line  plan  18  to  be  adopted  at  all.  gi     u 

The  alternative  consolidation  plan  for  New  England  proposes  to  create  a  single 
comprehensive  system  out  of  its  existing  carriers,  preserving  only  such  domestic 
competition  among  them  a.  shall  satisfythe  demands  of  the  stLte  This  plantro- 
ceeds  upon  the  theory  that  the  New  England  railroads,  as  distinct  from  those  in  trunk 
me  terntory,  possessing  a  distinct  individuality,  are  confronted  with  peculiar  prob- 
ems  native  to  the  district,  and  that  in  this  regard  they  have  an  entire  mutuality  of 
merest.  The  underiying  theory  is  that  the  New  England  carriers  are  closely  inter- 
locked with  one  another  by  historical,  financial,  and  commercial  considerations 
based  upon  geography;  and  that  their  joint  rehabilitation  may  be  best  brought  about 
by  concerted  action,  not  only  as  respects  relations  with  trunk  line  or  foreign  raU- 
road  connections,  but  also  as  respects  their,  relationship  with  the  New  England  pub- 
nL J  !k  ^^^^tions  peculiar  to  New  England  have  already  been  set  forth; 

Tqt  r.  .!''  '^°'^^^^'"  ^^"""^  ^^  material'  and  the  great  central  consuming  mar' 

w  I.  Kj^  C,  : 

63763—21 5 


M 


\ 


518 


INTERSTATE   COMMER(^E   COMMISSION   REPORTS. 


CONSOLIDATION    OK   RAILROADS. 


519 


^i 


•1 


'' 


kets;  their  high  proportion  of  passenger  business  and  density  of  traffic;  their  mani- 
fold junction  points,  and  the  expensiveness  of  terminal  operation;  their  coastwise 
location  and  propinquity  to  Canada;  to  say  nothing  of  the  peculiar  financial  and 
political  situation.    This  plan  proposes,  then,  the  creation  of  a  New  England  rail- 
road corporation  which  shall  take  over  the  New  Haven,  the  Boston  &  Maine,  the 
Maine  Central,  and  the  Bangor  <&  Aroostook.     It  is  all  plotted  on  map  8.     But  in 
order  to  satisfy  the  statute  as  to  competition,  and  aL«o,  of  course,  because  it  is  believed 
to  create  a  more  healthy  competitive  condition  as  a  whole,  the  territory  of  this  trans- 
portation group  Ls  to  remain  criss-crossed,  as  at  present,  by  independent  lines.    The 
Boston  &  Albany  would  be  left  as  an  east-and-west  competitor  (with  possibly,  as 
hereinbefore  discussed,  an  extension  to  Portland  by  abstraction  of  the  old  Worces- 
ter, Nashua  &  Portland  line  from  the  Boston  &  Maine).    The  Grand  Trunk,  in  the 
person  of  the  Central  Vermont,  would  still  penetrate  clear  across  this  territory  from 
the  northwestern  corner  of  Vermont  down  to  New  London  on  Long  Island  Sound. 
And  the  Grand  Trihik  would  also  continue  to  operate  into  Portland  as  at  present. 
And  in  addition,  of  course,  all  of  the  coastwise  connections  by  sea  would  remain  in 
full  force  and  effect.    In  brief,  the  group  plan  for  New  England  revives  the  policy 
once  pursued  under  the  Morgan-Mellen  administration  of  the  New  Haven  for  an 
almost  complete  New  England  railroad  system.    The  advantages  from  the  stand- 
point of  traffic  and  operation  as  then  contemplated  obtain  in  full  force  to-day;  but 
the  disadvantages  which  attended  and  brought  about  its  colossal  failure  would  be 
stripped  away.    This  plan  contemplates  no  monopoly  of  trolleys  or  water  power; 
no  exclusive  control  of  steamship  lines  or  of  the  water  front  appurtenant  thereto; 
no  detouring  of  freight  in  order  to  overweigh  the  proportion  of  through  joint  rates; 
no  prodigal  or  deceptive  financing;  and  no  attempt  at  corruption  of  public  opinion. 
Certain  advantages  of  a  group  treatment  of  New  England  are  manifest.    They 
may  best  be  considered,  first,  as  concerns  foreign  relations,  that  is  to  say,  dealings 
with  carriers  outside  of  New  England;  and,  secondly,  as  to  problems  of  domestic 
concern.    As  to  the  former,  relationship  with  outside  carriers,  the  outstanding  ad- 
vantage is  the  preservation  of  the  existing  freedom  of  interchange  with  connections 
from  every  part  of  the  country-.     New  England  has  prospered  in  the  past  because 
each  and  every  trunk  line  has  had  access  equally  with  all  other  trunk  lines  to  the 
New  England  gateways.    They  have  all  enjoyed  an  equal  opportunity,  almost  as 
free  as  by  competition  of  water  carriers,  to  benefit  not  only  from  the  immense  con- 
suming but  from  the  gathering  and  distributing  systems  of  these  New  England  roads. 
By  eight  gateways,  no  less  than  30  railways  west  and  south,  have  had  free  access; 
and  New  England  merchants  and  manufacturers  have  in  consequence  enjoyed  the 
rivalry  of  the.-^e  different  carriers  in  the  disposal  of  their  products.    The  peculiar 
need  of  the  trunk  lines  for  westbound  loadings,  renders  them  particularly  suscep- 
tible to  the  offerings  of  thousands  of  cars  daily  all  along  the  line  of  the  Hudson  River. 
This  entire  freedom  of  routing  is  a  great  boon,  and  the  competition  in  service  which 
attends  upon  it  is  of  prime  importance.    There  is  also  as  to  rates  a  responsiveness  in 
the  granting  of  commodity  carload  ratings,  not  to  be  overlooked.    What  would  be 
the  effect  upon  this  existing  freedom  of  routing  of  an  alliance  of  the  two  halves  of 
New  England  with  any  two  trunk  Unes,  let  alone  the  fact,  as  already  set  forth,  that 
this  choice  might  fall  upon  the  relatively  weaker  ones?    What  other  motive  could 
such  foreign  connections  have  for  assuming  the  heavy  financial  obligation  of  uphold- 
ing these  New  England  properties,  other  than  the  expectation  that  they  would  be 
able  to  direct  the  major  part  of  the  traffic  over  their  own  rails?    Assuredly  that  would 
be  the  motive,  and  necessarily  the  effect  of  any  New  Haven-Pennsylvania  alliance. 
Despite  the  legal  right  of  the  shipper  to  prescribe  his  route,  it  seems  inevitable  that 
the  traffic  would  tend  to  be  more  and  more  canalized.    Every  possible  influence 
would  make  for  that  result,  and  such  influence  would  be  as  powerful  in  any  alliance 

63 1.  C.  C. 


with  the  Erie  or  the  Lackawanna-Nickel  Plate  combinations  as  it  would  with  the 
Pennsylvania.  This  objection  is  decisive  by  itself  alone  as  commending  an  endorse- 
ment of  a  plan  of  group  independence  from  any  trunk  line  affiliation  whatsoever. 

Another  advantage  of  the  New  England  plan  is  that  it  affords  a  consolidated  power 
in  dealing  with  all  trunk  line  connections  as  to  divisions  of  through  rates.  The 
pending  problem  as  to  such  prorating  in  connection  with  the  recent  increases  of  rates, 
illustrates  the  difficulty  of  effecting  these  divisions  by  administrative  decree  of  the 
Interstate  Commerce  Commission.  The  preservation  of  an  open  market  for  trad- 
ing with  connections  emphasizes  the  desirability  of  mass  tactics  by  all  of  these  ter- 
minal carriers,  which  are  sulijected  to  peculiar  conditions  as  to  expense.  Nothing 
would  contribute  more  to  bringing  about  a  division  of  through  rates  on  an  equitable 
basis  than  a  wholesome  respect  among  the  trunk  lines  for  the  consolidated  power  of 
a  New  England  group,  free  to  divert  its  immense  and  lucrative  traffic  through  any 
of  its  numerous  gateways.  With  a  well-balanced  trunk  line  competition  among  the 
five  systems  set  up  by  this  plan,  the  advantage  attendant  upon  consolidation  is 
obvious. 

In  the  field  of  foreign  relations,  the  group  plan  promises  also  to  keep  open  not  only 
the  coastwise  routes  but  the  differential  lines  from  Canada.    As  to  Caftada,  the  experi- 
ence under  the  Railroad  Administration  is  conclusive.     It  was  only  by  constant 
watchfulness  and  zeal  that  the  trunk  lines  were  prevented  from  altogether  closing 
these  outlets  to  the  west  through  which,  of  course,  a  diversion  of  traffic  from  their  own 
raUs  persistently  occurs.    But  of  far  greater  importance,  not  potentially  but  actually, 
is  the  preservation  of  entirely  open  connections  by  sea.    Much  has  been  made  of  the 
rivalry  of  Atlantic  seaportr^,  and  it  is  perhaps  true  that  the  port  of  Boston  would  be  less 
apt  to  prosper  were  several  of  its  carriers  to  be  brought  under  closer  control  by  great 
railroad  systems  having  a  major  interest  in  the  development  of  New  York.    But  the 
coastwi  e  situation  is  of  equal  significance.    More  than  half  of  the  population  of  New 
England  is  located  within  25  miles  of  tidewater,  and  three-quarters  of  its  population 
IS  resident  within  50  miles  of  the  seacoast.     For  all  New  England,  but  particularly  for 
this  belt  of  territory,  such  a  relationship  between  rates— all-rail  rates  to  the  west  or 
south,  and  rates  by  rail  east  out  to  tide,  then  on  by  water— must  be  maintained  as 
shall  keep  open  the  coastwise  routes.    A  recent  example  is  afforded  by  the  output  of 
canners  of  corn  and  other  vegetables  in  Maine.    Their  season's  pack  in  1919  might 
go  to  the  Pacific  coast  either  all  rail  or  by  a  short  local  haul  by  rail  to  Portland  and 
thence  by  sea.    Is  there  any  question  that  if  the  New  England  roads  were  part  of  a 
trunk  line  system,  the  rate  adjustment  would  be  such  as  to  discourage  the  short  haul 
to  the  New  England  seaport  as  against  the  long  haul  to  Chicago?    But,  on  the  other 
hand,  given  a  local  New  England  railroad,  with  the  choice  only  as  between  the  short 
local  haul  to  the  seaport  and  the  scarcely  longer  haul  to  the  Hudson  River  on  a  prorate 
ba-is,  IS  It  not  likely  that  a  freer  adjustment  would  obtain  whereby  the  coastwise  route 
would  enjoy  at  least  equal  encouragement  with  the  all-rail  haul?    Such  considerations 
apply  with  peculiar  force  to  the  maintenance  of  coal  supply.     With  approximately 
35,000,000  tons  of  fuel  annually  requirea,  it  is  of  vital  importance,  not  only  as  respects 
co^t  of  carnage,  but  also  the  chance  of  congestion,  that  the  sea  routes  be  kept  fully 
alive.    This,  it  is  submitted,  is  far  more  likely  to  happen  under  a  New  England  group 
plan  than  under  a  trunk  line  affiliation. 

Another  possible  advantage  of  a  regional  New  England  consolidation  has  to  do 
with  the  fuel  conditions  territorially.  An  outstanding  disability  of  these  railroads 
1.^  their  remoteness  from  a  soft-coal  fuel  supply  for  company  use.  The  industries  of 
this  out-of-the-way  region  are  also  utterly  dependent  upon  the  carriers  for  their  indus- 
trial supplies;  and  an  immense  volume  of  anthracite  is  required  for  domestic  consump- 
tion. The  aggregate  tonnage  for  this  purpose  alone  is  huge.  Of  326,652  cars  received 
at  Boston  &  Maine  gateways  in  1919,  about  123,000  were  loaded  with  coal.  All-rail 
w  I,  C.  C, 


520 


INTERSTATE  COMMERCE  COMMISSION   REPORTS. 


CONSOLIDATION   OF   RAILROADS. 


521 


rates  to  the  western  gateway's  of  southern  New  England  rose  above  $3  a  ton  after  the 
war.  Rail  rates  from  the  southern  mines  to  tide  are  nearly  as  high,  and  to  this  figure 
the  ocean  rate  had  to  be  added.  These  ocean  rates  before  the  war,  about  00  to  75 
cents  from  Hampton  Roads  to  Bo.^ton,  rose  to  $3  a  ton  and  are  now  about  $1.80. 
Under  such  unusual  circumstances  and  even  at  all  times  normally,  southern  and 
western  New  England  is  almost  entirely  dependent  for  its  company  fuel  upon  all- 
rail  carriers.  Water  rates  are  highly  fluctuating  and  the  higher  the  water  rate  the 
greater  the  encouragement  to  all-rail  carriage.  Long-haul  through  carriage  in  solid 
trainloads,  and  particularly  service  at  cost  without  the  necessity  of  publishing  rates,  the 
coal  being  treated  as  company  fuel,  might  result  in  substantial  economies.  Yet  it 
should  be  understood  that  such  a  fuel  line  would  be  serviceable  only  for  southern  and 
western  New  England,  inasmuch  as  the  normal  course  for  fuel  in  Elaine  and  the 
vicinity  of  Boston  is  by  rail  and  tide.  A  larger  proportion  of  company  fuel  is  thus  all 
rail  for  the  New  Haven  than  for  the  Boston  &  Maine.  The  exact  line  of  demarkation 
between  all-rail  and  tide  territory  varies  )wth  as  to  location  and  according  to  the 
movement  of  charter  rates.  The  Boston  &  Maine  for  a  part  of  its  all-rail  coal,  however, 
draws  from  the  northern  Pennsylvania  field  by  way  of  the  New  York  Central.  But 
the  New  Haven  generally  arranges  better  deliveries  over  the  Pennsylvania  via  the 
New  York  gateway  or  by  the  Baltimore  &  Ohio  through  Maybrook.  Thus  it  appears 
that  no  single  fuel  line  at  present  serves  all  New  England;  and  not  infrequently  the 
roads  have  found  it  desirable  to  scatter  their  risks  by  spreading  their  contracts,  in 
order  to  insure  against  change  of  market  conditions  or  interruptions  from  strikes. 
In  general  there  appears  to  be,  even  underl>4ng  the  abnormal  tendencies  effected  by 
the  war,  a  normal  and  economic  tendency  to  substitute  all-rail  for  a  broken  rail-and- 
water  service.  The  decline  of  Atlantic  coastwise  traflBc  is  a  case  in  point.  New  Eng- 
land perhaps  may  safely  anticipate  important  developments  in  this  direction,  and  the 
zone  throughout  which  all-rail  coal  may  successfully  compete  with  tidewater  coal  will 
correspondingly  broaden  out  as  the  years  go  by.  For  1919,  80  per  cent  of  the  bitu- 
minous commercial  fuel  handled  by  the  New  Haven  moved  all  rail.  For  anthracite 
95  per  cent  so  moved.  Nor  does  this  include  tidewater  movement  foi;  port  consump- 
tion, a  considerable  proportion  of  which  moved  all  rail.  Sulistantial  reassertion  of 
prewar  conditions  will  doubtless  occur,  but  it  is  also  likely  that  the  pendulum  will 
never  swing  as  far  back  as  before.  All  of  which  emphasizes  the  desirability  of 
planning  for  a  company  and  a  commercial  fuel  line  for  this  district. 

The  two  most  accessible  sources  of  soft  coal  are  the  Clearfield  region  lying  north 
and  northeast  of  Pittsbui^h,  and  the  Fairmount  and  Connellsville  district  lyiag  mainly 
due  south  of  Httsburgh.  The  location  of  these  coal  measures  is  indicated  roughly  on 
map  8.  As  for  the  Clearfield  region,  it  is  tapped  either  by  the  Pennsylvania  or  New 
York  Central  systems  or  by  the  Buffalo,  Rochester  &  Pittsburgh  line  (see  map  (J), 
which  latter  road  traverses  it  almost  from  end  to  end.  Coal  from  this  Clearfield  region, 
necessarily  reaches  the  western  New  England  gateways  by  nearly  all  of  the  trunk 
lines,  but  perhaps  the  lai^est  amount  is  now  brought  from  the  Buffalo,  Rochester  & 
Pittsburgh  and  over  the  rails  of  the  New  York  Central,  principally  to  northern  New 
England.  The  other  soft-coal  region,  lying  in  southwestern  Pennsylvania  or  northern 
West  Virginia,  is  reached  principally  over  the  rails  of  the  Baltimore  &  Ohio  and  the 
Western  Maryland.  These  roads,  as  already  describe^l  in  connection  with  these 
properties,  deliver  the  coal  either  to  the  Pennsylvania  or  the  Philadelphia  &  Reading 
system  for  carriage  by  way  of  Harrisburg  and  Reading.  The  route  is  shown  on  both 
maps  4  and  6.  This  coal  is  then  traiisported  to  the  New  Haven  rails  by  way  of  the 
bridge  lines  of  the  Lehigh  &  Hudson  or  the  Lehigh  &  New  England.  The  former  has 
already  been  described  (page  506,  supra).  It  serves  a  number  of  trunk  lines  interested 
iu  this  business  in  common.  As  for  the  Lehigh  &  New  England,  the  northerly  of  the 
two  bridge  lines  shown  on  map  8,  it  cuts  across  the  northwestern  comer  of  New  Jersey 

63 1,  c.  e. 


to  a  connection  at  Campbell  Hall  with  the  Central  of  New  England  ai\d  the  Pough- 
keepsie  bridge  gateway.  This  road  at  present  is  controlled  by  the  Lehigh  Coal  & 
Navigation  Company,  closely  affiliated  with  the  Central  Railroad  of  New  Jersey  and 
more  or  less  interlocked  with  it.  But  it  is  also  an  independent  originating  coal  road 
as  well  as  a  bridge  line.  Its  tonnage  is  highly  competitive  with  that  which  moves 
over  the  parallel  bridge  line  of  the  Lehigh  &  Hudson.  The  competition  between 
these  two  bridge  properties  should  by  all  means  be  perpetuated.  The  Lehigh  & 
Hudson,  however,  is  at  present  interlocked  in  ownership  with  the  Lehigh  &  New 
England  by  reason  of  the  fact,  as  indicated  on  page  506,  that  the  Lehigh  Coal  &  Navi- 
gation Company,  controlling  the  Lehigh  &  New  England,  together  with  the  Central 
Railroad  of  New  Jersey,  actually  owns  a  majority  of  its  shares.  This  interlocking 
relationship  should  be  broken  up  if  true  competition  is  to  be  promote<l.  The  Lehigh 
&  Hudson  might  well  continue  to  be  a  bridge  controlled  by  all  the  trunk  lines:  that 
is  to  say,  controlled  from  the  western  end.  But  in  that  event  the  Lehigh  &  New 
England  ought  to  be  owned  from  the  eastern  end;  that  is  to  say,  it  ought  to  be  incor- 
porated either  with  the  New  Haven  road  or  with  the  New  Haven  as  part  of  a  con- 
solidated New  England  s>'stem.  The  needed  competition  of  all-rail  coal  routes  would 
by  this  means  be  promo te<l  and  perpetuated. 

At\  even  more  ambitious  project  for  providing  New  England  with  an  independent 
fuel  line  would  be  not  only  the  taking  over  of  the  Lehigh  &  New  England  but  its 
extension,  at  least  as  far  as  Harrisburg,  Pa.    Thus,  the  very  heart  of  both  the  anthra- 
cite and  bituminous  coal  territory  would  be  reached;  or  rather,  a  great  junction  about 
eciuMistant  from  the  anthracite  fields  to  the  northeast,  the  Clearfield  region  to  the 
northwest,  and  the  Fairmount  coal  measures  to  the  southwest.    The  dominant  posi- 
tion of  Harrisburg  in  this  regard,  midway  on  the  important  interior  fuel  line  of  the 
Baltimore  &  Ohio,  has  already  been  discussed  in  connection  with  Philadelphia  & 
Reading  affairs.    Harrisburg  would  be  reached  as  indicated  on  map  8,  by  means  of 
trackage  taken  by  the  Lehigh  &  New  England  over  the  Reading  system  to  Dauphin, 
Pa.    Only  a  short  bit  of  construction,  already  projected  before  the  war,  would  be 
necessary  for  the  connection  at  Auburn.    Trackage  from  Dauphin  into  Harrisburg 
could  be  had  over  the  rails  of  the  Pennsylvania.    It  is  not  recommended  in  this  plan 
that  this  alternative  fuel  route  should  be  extended  beyond  Harrisburg,  although  it 
might  be  practicable  to  carry  it  on  to  a  physical  connection  with  the  Baltimore  & 
Ohio  or  the  Western  Maryland  by  taking  one  of  the  two  lines  now  devoted  to  this 
traffic.     It  is  believed  that  such  a  fuel  line  would  materially  contribute  to  the 
effective  and  economic  operation  of  a.  New  England  territorial   syst^n.     But  it 
could  be  developed  and  effectively  utilized  only  in   connection  with  a  regional 
group  plan,  comprising  alike  the  natural  all-rail  coal  territory  of  the  several  raihoads, 
at  present  independei\t  of  one  another.    It  could  not  be  worked  out  under  any  trunk 
line  plan . 

One  other  possibility,  partaking  of  the  nature  of  a  trunk  line  plan,  is  consolidation 
of  a  part  or  all  of  the  New  England  roads  with  either  the  Lehigh  Valley  or  the  Del- 
aware, Lackawanna  &  Western,  together  with  the  Buffalo,  Rochester  &  Pittsbm^h 
Raihoad.  It  will  be  recalled  tliat  the  Lackawanna  under  this  plan  has  been  utilized 
as  a  part  of  the  main  stem  of  a  trunk  line  system;  whereas  the  Lehigh  Valley  has  been 
incorporated  in  a  competing  system  built  upon  the  Erie.  These  perhaps  are  easily 
interchangeable  in  these  two  relationships.  The  Lehigh  Valley  is  equally  serviceable 
for  a  Nickel  Plate  stem;  and  the  Lackawanna  might  go  to  support  the  Erie  system. 
But  whiche^^er  one  is  not  used  as  part  of  the  stem  of  the  Nickel  Plate  system  might 
go  into  a  New  England  alliance,  it  is  allegal,  in  order  that  the  Buffalo,  Rochester  & 
Pittsburgh,  added  to  it,  should  give  access  to  the  Clearfield  coal  measures  (depicted 
on  map  8).  Several  important  objections  to  this  proposal  suggest  themselves.  One 
is  that  such  alliance  would  distinctly  prejudice  the  competing  West  Virginia  coal 

tJ3  I.  C.  C. 


522 


INTERSTATE   (^OMMERCE  COMMISSION   REPORTS. 


(CONSOLIDATION   OF   RAILROADS. 


523 


measures  tributary  to  the  Baltimore  &  Ohio.  Another  is  that  the  route  by  way  of 
the  Buffalo,  Rochester  &  Pittsburgh  is  extremely  indirect  as  compare<l  with  the 
straight  line  by  way  of  the  Lehigh  &  New  England.  And  a  third  is  the  fact  that  the 
withdrawal  of  the  Buffalo,  Rochester  &  Pittsburgh  and  either  one  of  the  other  two 
trunk  lines  from  the  Nickel  Plate  system,  as  already  proposed,  would  practically 
put  it  out  of  the  running  in  competition  with  the  other  trunk  line  systems.  For  all 
these  reasons  this  plan  is  rejected  in  favor  of  the  proposal  of  the  Lehigh  &  New  England 
line  to  Harrisburg.  This,  as  already  explained,  reaches  a  point  so  nearly  equidistant 
from  all  of  the  different  competing  coal  fields  as  to  preserve  the  present  equilibrium 
in  the  matter  of  supply.  It  is  held  to  be  of  paramount  importance  in  any  official 
government  plan  to  preserve  this  existing  commercial  parity. 

The  foregoing  advantages  of  the  group  plan  have  been  concerned  with  outside  or 
foreign  relationships.  Domestic  operation  and  traflSc  also  merit  consideration.  It 
is  important  that  there  be  a  consistent  administration  of  the  different  gateways. 
Congestion  locally  has  been  all  too  frequent.  At  one  time  the  Harlem  River  might 
be  embargoed,  and  at  another  trouble  might  develop  at  Mechanicville.  Between 
April  and  October,  1920,  congestion  on  the  Boston  &  Maine  embargoed  traffic  on  the 
Delaware  &  Hudson  no  less  than  57  days  in  the  carriage  of  coke.  Some  of  the  old 
difficulties  due  to  rigid  car-service  rules,  requiring  the  return  of  empties  from  New 
England  by  the  same  gateways  through  which  they  entered — an  impossible  con- 
dition at  times,  like  trying  to  float  chips  upstream  against  the  current — have  been 
obviated.  But  it  is  submitted  that  the  location  of  New  England  in  a  transporta- 
tion pocket  with  few  outlets,  requires  a  greater  degree  of  unified  administration  than 
is  possible  under  existing  conditions.  And  then,  too,  there  is  the  desirability  of 
free  local  interchange  of  freight  through  the  many  junction  points  which  thickly 
dot  New  England  territory.  The  Boston  &  Maine  is  said  to  have  a  junction  for  every- 
13  miles  of  trackage,  and,  within  30  miles  of  Boston,  a  junction  for  every  8  miles  of 
track.  A  recent  report  of  the  New  England  Traffic  League  on  motor  transport  em- 
phasizes the  loss  of  tonnage  from  station  to  station  because  the  local  rates  have 
reached  a  point  higher  than  that  charged  for  pick-up  and  delivery  by  truck.  More- 
over, rail  delays  are  eliminated  by  tnicking.  A  closer  correlation  between  the  rail- 
roads and  all  other  forms  of  local  transportation  is  desirable.  A  consistent  develop- 
ment of  means  for  local  interchange  would  seem  to  be  favored  by  regarding  all  New 
England  as,  in  a  sense,  a  great  terminal.  Even  in  the  matter  of  rates  all  the  rail- 
roads tc^ether  might  charge  less  and  live.  At  present  between  northern  Maine  and 
a  point  on  Long  Island  a  quoted  rate  has  to  be  divided  between  five  railroads.  Ob- 
viously the  share  of  each  per  100  pounds  approaches  the  vanishing  point  under  such 
subdivision.  Think  also  of  the  clerical  expense  of  keeping  track  of  such  matters. 
It  is  the  opinion  of  competent  traffic  experts  that  a  lower  rate  might  be  offered  for 
such  shipments  if  it  were  not  necessary  to  split  up  the  proceeds  in  the  present 
manner. 

A  final  advantage  of  the  groiip  plan  is  that  it  would  promote  a  higher  sense  of  local 
interest  and  of  resjMjnsibility,  financial  as  well  as  commercial.  The  evils  of  absen- 
tee management,  free  from  or  at  times  positively  defiant  of  public  opinion,  were  never 
more  clearly  illustrated  than  in  the  old  New  Haven  railroad.  The  problem  of  re- 
habilitating the  New  England  carriers  is  of  no  mean  magnitude.  It  will  demand 
the  husbanding  of  every  resource,  public  and  private,  as  well  as  financial  and  politi- 
cal. All  needless  duplication  must  be  avoided.  There  must  be  a  consistent  devel- 
opment of  highways  and  of  light  railways  which  serve  as  feeders.  Every  invest- 
ment must  be  made  to  count  to  the  full.  And  all  the  zeal  and  enthusiasm  in  the 
raising  of  new  funds  and  the  development  of  resources  can  best  be  brought  about 
only  by  a  management  representative  of  the  best  intelligence  of  the  immediate  com- 
munity.   Who  shall  say,  indeed,  that  public  aid  may  not  be  required,  given  a  guar- 

63 1.  C.  C. 


anty  of  absolute  uprightness  and  public  spirit?  The  board  of  directors  of  such  a 
New  England  corporation  should  contain  at  least  one  representative  appointed  by 
the  governor  of  each  of  the  New  England  states.  And  the  services  of  these  repre- 
sentatives should  not  be  merely  perfunctory.  The  post  should  be  salaried  and  a 
public  accountancy  should  be  rendered,  by  means  of  which  public  support  for  the 
joint  enterprise  shall  be  assured  of  continuance.  Not  one  of  these  advantages  could 
conceivably  attend  administration  of  these  New  England  properties  in  divided 
imits,  which  constituted  mere  attachments  or  extensions  of  great  trunk  line  systems, 
necessarily  directed  from  New  York.  This  last  consideration,  political,  or  even,  if 
you  please,  spiritual,  in  absence  of  all  the  rest,  would,  it  is  believed,  be  almost  con- 
clusive. 

Many  objections  to  the  New  England  group  plan  must  be  met.    The  first  of  these 
is  that  it  runs  counter  to  the  express  terms  of  the  statute,  that  **  competition  shall 
be  preserved  as  fully  as  possible. "     It  is  contended  that  this  is  virtually  a  plan  for 
r^onal  monopoly,  a  plan  which  was  expressly  rejected  by  Congress  in  favor  of  the 
creation  of  a  scheme  of  balanced  competition.    This  contention  of  illegality  may  be 
readily  met.    The  distinction  must  be  drawn  between  competition  within  New 
England  and  competition  of  New  England  with  points  beyond  its  confines.     It  has 
already  been  established  that  any  plan  other  than  the  group  arrangement  will  sub- 
stantially lessen  competition  in  service  between  all  the  connections  west  and  south 
outside  the  New  England  gateways.    Only  by  the  group  plan  can  this  existing  out- 
side competition  be  preserved.    The  legal  objection  applies,  if  at  all,  only  to  intra- 
New  England  competition;  and  of  this  there  is  substantially  as  much  under  a  group 
plan  as  there  is  at  present.    For  it  should  be  noted  that  New  England  is  now  so  par- 
celed out  as  to  railroads  that  the  only  competitive  areas  are  along  either  the  line 
of  the  Boston  &  Albany  or  of  the  Grand  Trunk.    At  about  a  dozen  places,  such  as 
Worcester,  Springfield,  Holyoke,  Lowell,  and  Nashua— in  other  words,  along  the 
boundary  between  the  Boston  &  Maine  and  the  New  Haven — there  are  three  roads 
in  competition  with  one  another.    But  the  group  plan  proposes  no  severance  of  the 
Boston  &  Albany  from  the  New  York  Central.    This  road  will  still  compete,  at 
almost  every  point,  just  as  effectively  with  the  Boston  &  Maine  and  New  Haven 
united  as  it  does  with  the  two  of  them  separately  as  at  present.    And  the  competi- 
tion of  two  roads  as  fully  answers  the  piu-pose  of  the  statute  as  of  three.    It  is  submitted 
as  essential  that  the  existing  Boston  &  Albany  and  Grank  Trunk  lines  should  continue 
to  cut  east-and-west  and  north-and-south,  clear  across  the  territory;  and,  of  course, 
all  the  coastwise  points  have  free  competition  by  water  in  any  event.    If,  perchance, 
it  be  expedient  to  still  further  assure  satisfaction  of  the  statute,  the  Boston  &  Albany 
can  be  extended  to  Portland  by  the  Worcester,  Nashua  &  Portland  line,  as  else- 
where suggested;  the    Rutland    Railroad,   allocated    to   the    New    York    Central, 
might  also  be  extended  down  to  Worcester  by  trackage  rights  over  the  old  Cheshire 
Railroad;  and  the  Delaware  &  Hudson  might  be  extended  from  Rutland  into  White 
River  Junction.    But  it  is  confidently  believed  that  the  necessity  of  group  treat- 
ment in  order  to  preserve  competition  between  the  carriers  outside  of  New  England 
affords  a  sufficient  answer  to  this  objection,  which  is  alone  applicable  in  very  slight 
measure  to  competition  within  New  England  borders.    If,  however,  it  were  neces- 
sary, an  amendment  of  the  transportation  act  to  permit  this  regional  consohdation 
for  New  England  might  well  be  considered. 

The  second  objection  to  the  group  plan  is  far  more  important  and  much  more  difficult 
to  meet.  It  is  that  the  prostration  of  the  New  England  lines  is  universal ;  and  that  the 
group  plan  permits  of  no  such  alliance  of  weak  and  strong  properties,  in  order  to  balance 
transportation  costs  and  property  valuation,  as  is  contemplated  under  the  law.  Only 
by  reaching  beyond  the  confines  of  New  England,  it  is  alleged,  can  sufficiently  strong 
companies  be  found  to  lend  their  support  for  the  rehabilitation  of  the  New  England 

63 1.  C.  C. 


524 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION  OF  RAILROADS. 


I)        I 


I  '  * 


Imee.  It  is  obvious  that  great  expenditures  are  called  for  in  the  immediate  future 
m  order  to  relieve  congestion,  provide  adequate  terminal  facilities  and  equipments, 
expedite  loading  and  unloading,  and  afford  such  improvements  and  betterment*  as 
shall  keep  pace  with  the  growth  of  population  and  the  demands  of  industry.  It  is 
not  alone  a  problem  of  supporting  these  properties,  now  scarcely  earning  operating 
expenses,  and  of  keeping  them  alive,  but  it  is  a  question  of  their  proper  development. 
Such  development  requires  credit  and  the  assurance  of  adequate  traffic  to  support 
the  new  output  of  securities.  The  present  plight  is  avowedly  critical .  But,  on  the 
other  hand,  the  foregoing  analysis  of  possible  mergers  with  outside  roads  has,  it  is 
beheved,  established  the  fact  that  these  alliances  may,  under  the  statute,  not  take 
place  with  the  already  overdominant  systems  of  the  New  York  Central  and  the 
Pennsylvania.  They  must,  if  at  all ,  take  place  through  association  with  the  Delaware 
<k  Hudson,  Erie,  and  Lackawanna- Nickel  Plate  groups.  Each  of  these  is  in  itself 
confronted  with  the  problem  of  meeting  the  competition  of  the  two  greater  systems. 
AH  of  their  strength  must  be  conserved  for  the  satisfaction  of  their  own  proper  trunk 
line  needs.    Little  help  could  be  had  from  that  source. 

No  statistical  verification  of  the  stability  of  a  New  England  regional  system,  as 
thus  proposed,  may  be  confidently  presented  because  all  the  data  are  drawn  from  a 
period  before  the  war  when  normal  conditions  prevailed;  but  exhibit  3  demonstrates 
the  extraordinary  collapse  which  has  occurred.  Under  the  conditions  prevalent  in 
1917  a  percentage  of  net  operating  income  to  investment  in  road  and  equipment  of 
5.33  per  cent  was  enjoyed.  This  seems  almost  unbelievable  in  the  light  of  the  utter 
disturbance  of  operating  conditions  by  the  war  together  with  the  effects  of  the  current 
business  depression,  but  surely  some  matters  will  right  themselves  in  due  time. 
Coal  prices  are  already  substantially  lower  and  wages  are  beginning  to  come  down. 
In  the  division  of  through  rates  a  tardy  relief  of  some  sort  is  bound  to  come.  The 
most  acute  phase  of  the  current  industrial  depression  has  passed.  Is  it  not  just  con- 
ceivable that  with  an  adequate  and  independent  fuel  line  of  its  own,  and  with  the 
elimination  of  all  these  other  abnormal  factors,  the  feasibility  of  a  self-sustaining 
thoroughly  reorganized  New  England  system  may  demonstrate  itself? 

The  standing  of  Boston  as  a  great  seaport  may  not  be  overlooked  as  an  element  in 
the  group  plan  of  consolidation  for  New  England.  The  growth  of  the  port,  in  face  of 
competition  with  New  York,  Philadelphia,  and  Baltimore  has  been  disappointingly 
slow.  There  has  been  an  absolute  decline  in  foreign  business.  In  1910  Boston  ex- 
ported 582,000  barrels  of  flour.  The  exports  in  1920  were  273,000  barrels.  In  1913 
Boston  and  Baltimore  were  on  a  parity  in  the  clearances  of  American  and  foreign 
vessels  engaged  in  foreign  trade.  In  1919  clearances  from  Baltimore  exceeded  those 
from  Boston  by  400.  In  the  decade  to  1920,  exports  of  grain  from  Boston  fell  from 
9,322,000  bushels  to  6,059,000.  The  exports  from  Galveston  increased  coincidently 
from  1,195,000  to  46,034,000,  and  from  New  Orleans  from  7,486,000  to  58,182,000. 
Galveston  actually  shipped  out  86,645,000  bushels  during  the  year  ending  June  30, 
1920.  Boston  can  scarcely  hope' to  compete  on  even  terms  with  the  seaports  which 
are  nearer  either  to  the  great  population  and  industrial  centers  of  the  middle  states 
or  the  grain  territory  farther  west.  Conceivably,  the  future  for  Boston  as  a  seaport 
and  perhaps  a  great  one,  lies  in  its  geographical  relation  to  Canada  and  the  great 
northwest.  Boston  offers  unparalleled  advantages  as  an  all-the-year-round  point  of 
export  for  the  Canadian  Pacific  and  the  Grand  Trunk  lines.  Attention,  it  is  believed, 
ahould  be  directed  to  stimulation  of  this  business,  utilizing  Boston  as  a  port  of  transit, 
just  as  Rotterdam  has  grown  as  a  port  of  entry  for  the  countries  lying  behind  Holland! 
It  will  always  be  a  disadvantage  that  the  rail  routes  cross  national  boundaries;  but  the 
geographical  layout  and  the  disability  of  the  Canadian  ports  indicate  clearly  a  possi- 
bility of  growth  for  the  port  of  Boston.  Such  stimulation  of  transit  trade  with  Canada 
can  be  undertaken  advantageously  only  by  the  prestige  and  power  of  all  of  the  New 

63  I.  C.  C. 


625 


England  railroads  combined.  A  task  of  such  magnitude  could  not  be  successfully 
attempted  by  any  one  railroad  alone,  and  any  trunk  line  affiliation,  bound  to  be 
involved  with  New  York  or  other  rival  Atlantic  ports,  would  tend  to  discourage 
rather  than  to  develop  such  a  program. 

One  is  forced  to  the  conclusion,  then,  that  the  rehabilitation  of  the  New  England 
railroads  must  take  place  through  a  mustering  of  all  of  the  financial  resources  of  the 
region,  public  as  well  as  private,  if  necessary.  The  industrial  preservation  of  New 
England  demands  it.  Some  of  the  existing  difficulties— fuel  costs,  material  expenses, 
and,  it  is  to  be  hoped,  some  of  the  labor  cost,  may  prove  to  be  temporary  rather  than 
permanent  conditions.  One  suggestion  by  a  most  astute  banking  expert  is  that  the 
New  England  railroads  should  be  taken  over  by  a  joint  ownership  of  all  the  trunk 
lines,  once  they  are  aggregated  into  a  limited  number  of  systems.  But  this,  it  is 
believed,  is  too  remote  a  remedy,  if  ever,  indeed,  practicable.  Another  suggestion 
IS  that  the  great  American  industries,  as  a  measure  of  self-protection,  should  unite  in 
investment  in  these  New  England  roads.  And  then  there  is  the  possibility  of  state 
funds,  as  once,  quite  wastefuUy  to  be  sure,  the  construction  of  the  Hoosac  tunnel 
was  brought  about.  But  in  any  event,  it  is  submitted,  no  such  rehabilitation  may 
take  place  until  the  New  Haven  particularly  has  been  subjected  to  such  a  thorough- 
going financial  reorganization  as  has  taken  place  on  the  Boston  &  Maine.  It  seems 
useless  to  discuss  further  general  increases  of  New  England  rates,  either  freight  or 
passenger,  except  perhaps  sporadically.  The  disastrous  effect  of  overloading  trans- 
portation costs  for  a  remote  region  dependent  upon  the  long  haul  both  for  fuel  and 
raw  material  inbound,  and  all  of  its  products  outbound,  is  too  obvious  to  need  reiter- 
ation. No  other  course  seems  open  except  the  adoption  of  vigorous  measures  for 
setting  the  New  England  house  in  order,  recognizing  past  mistakes  and  pocketing 
the  losses,  and  then  proceeding  with  confidence  to  set  up  a  new  organization  which 
shall  have  such  assurance  from  public  reputation  of  straightforwardness  and  honesty 
that  the  invincible  power  of  New  England's  associated  capital  and  industry  shall 
loyally  support  the  enterprise.^ 


» Admirably  stated  by  Philip  Cabot  in  Atlantic  Monthly,  August,  1921,  p.  258  et  teq. 
63 1.  C.  C. 


526 


INTERSTATE   COMMERCE   (COMMISSION   REPORTS. 


(CONSOLIDATION   OF  RAILROADS. 


527 


I 


I 


Chapter  III. — Chesapeake  Region  (Lake-to-Tide,  Soft  Coal). 

Three  railroads  based  oh  Chesapeake  Bay,  described,  526. — Specialization  in  coal 
traffic,  526. — The  geographic  location  (map),  527. — Technique  of  coal  road  opera- 
tion, 528. — Two  varieties  of  coal,  528. — Eastern  and  western  markets  described, 
529. 

Need  of  flexibility  in  carriage  east  and  west,  529. — Plans  for  Virginian  Railway  ex- 
tension to  Toledo  (map),  530. — Involved  history  of  Toledo  &  Ohio  Central  and 
Kanawha  &  Michigan,  530. — Norfolk  &  Western  extension  to  Lake  Erie,  530. — 
Pennsylvania  Railroad  claims  for  continued  control,  532. — Consolidation  of  Vir- 
ginian and  Norfolk  &  Western  feasible,  533. — Possible  joint  use  of  two  Toledo 
&  Ohio  Central  lines,  533. 

Statistical  verification,  534. 

Three  railroads,  based  upon  Hampton  Roads  in  the  lower  Chesapeake  Bay,  although 
lying  in  part  in  trunk  line  territory  and  to  some  degree  participating  competitively 
in  tnmk  line  business,  merit  consideration  by  themselves.  The  federal  Railroad 
Administration  created  a  regional  group  of  them  by  virtue  of  their  peculiar  situation 
and  characteristics.  The  three  roads  comprehended  are  the  Chesapeake  jfe  Ohio,  the 
Norfolk  &  Western,  and  the  Virginian.  They  are  shown  distinctively  on  map  9. 
The  Chesapeake  &  Ohio  alone  is  at  present  a  tnink  line,  as  depicted  by  the  solid  black 
lines.  Its  route  from  Cincinnati  to  Chicago,  the  Chesapeake  &  Ohio  of  Indiana,  is  a 
weak  road,  avoiding  important  sources  of  traffic  and  not  in  good  condition  for  heavy 
usage,  but  the  Hocking  Valley  affords  the  system  direct  access  through  Columbus  to 
the  great  lakes  at  Toledo.  The  Norfolk  &  Western  is  the  next  in  extent.  It  reaches 
Cincinnati  and  Columbus.  Twenty  years  ago,  it,  like  the  Chesapeake  &  Ohio,  evi- 
dently contemplated  extension  to  the  head  of  each  of  the  great  lakes.  But  as  it 
threatened  to  disturb  the  harmony  which  was  being  set  up  by  a  community  of  interests 
among  the  trunk  lines  it  was  at  first  offered  to  the  Southern  Railway — a  Morgan 
property — and  was  finally  picked  up  by  the  Pennsylvania,  which  has  built  it  most 
effectively  into  its  system.  The  geographical  relationship  between  two  railroads  has 
already  been  depicted  on  map  2.  This  shows  that  it  constitutes  a  very  roundabout 
detour  line  for  the  Pennsylvania  whenever,  in  an  emergency,  a  blockade  of  the  main 
stem  occurs.  But  it  is  nevertheless  a  very  present  help  in  time  of  trouble.  Since 
the  acquisition  of  a  controlling  interest  in  the  Norfolk  &  Western  by  the  Pennsylvania, 
most  of  the  through  business  of  the  former  at  the  northeastern  extremity  at  Hagers- 
town,  Md.,  and  on  the  west  at  Columbus  and  Cincinnati,  is  taken  care  of  by  the 
Pennsylvania.  Although  only  about  38  per  cent  of  the  total  common  and  preferred 
stocks  of  the  Norfolk  &  Western  is  held  by  the  Pennsylvania,  the  road  is  to  all  intent 
and  purposes  a  Pennsylvania  property.  The  Virginian  Railway,  the  third  in  this 
group,  shown  by  the  line  of  round  dots,  is  more  highly  localized  on  the  map  even 
than  the  Norfolk  &  Western.  It  barely  extends  from  the  West  Virginia  coal  fields  at 
Surveyor  to  tidewater  at  Hampton  Roads.  It  has  no  western  connections  whatsoever 
and  is  exclusively  confined  therefore  to  tide  traffic.  Thus  it  appears  that  as  to  com- 
prehensiveness the  three  properties  in  this  group  differ  from  one  another  in  degree. 
The  Chesapeake  &  Ohio  has  succeeded  independently  in  constituting  itself  a  lake-to- 
tide  soft-coal  property.  The  Norfolk  &  Western  has  not  progressed  more  than  two- 
thirds  of  the  way  to  the  Lake  Erie  water  front,  and  the  Virginian  is  still  entirely  a 
tidewater  affair. 

The  peculiarity  of  these  Hampton  Roads  properties  is  their  specialization  in  the 
carriage  of  bituminous  coal  and  coke.    For  1919  these  products  constituted  approxi- 

63 1.  C.  C. 


mately  70  per  cent  of  the  traffic  of  the  Chesapeake  &  Ohio  lines.  The  same  ratio, 
approximately,  would  doubtless  hold  for  the  other  two  systems.  This  coal  is  produced 
from  numerous  mines  in  a  limited  area  in  West  Virginia  and  Kentucky.  This  r^on, 
together  with  northeastern  Tennessee,  affords  perhaps  the  greatest  reserve  of  fuel 


supply  in  the  United  States.  From  this  territory  the  energy  for  the  future  industrial 
development  of  the  entire  valley  of  the  great  lakes  must  be  derived.  Railroads 
radiate  from  it  in  every  direction.  The  location  of  the  carriers  in  relation  to  the 
coal  fields  is  disclosed  by  the  accompanying  map.^  This  shows  that  the  Chesapeake 
&  Ohio  traverses  the  entire  New  River  and  Kanawha  fields,  with  branches  to  the 


»  A  more  comprehensive  map,  showing  rate  adjustments,  is  published  by  the  Interstate  Commerce 
Commission  in  Bituminous  Coal  to  C.  F.A.  Territory,  46 1.  C.  C,  66, 158. 

63 1.  C.  C. 


^iii^ 


528 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


529 


Elk  Horn  and  Logan  regions.  The  Norfolk  &  Western  serves  the  Pocahontas,  Tug 
River,  and  Thacker  fields.  The  Virginian  serves  the  Pocahontas  field  and  the  southern 
end  of  the  New  River  field.  The  map  also  indicates  the  entrance  from  the  south  of 
the  Carolina,  Clinchfield  &  Ohio,  ending  at  Elkhom  City,  and  from  the  west,  as  a 
very  important  recent  development,  the  Louisville  &  Nashville  penetrating  to  the 
Elk  Horn  measures.  The  coal  going  out  in  every  direction  by  these  various  lines, 
they  all  possess  certain  features  in  common.  But  the  basic  differences  between  trunk 
line  and  southern  conditions,  as  already  set  forth,  commend  a  separate  treatment  of 
the  Pocahontas  group  from  the  Louisville  &  Nashville  and  the  Clinchfield  roads. 

The  technique  of  coal-road  operation  especially  sets  off  these  properties  from  those 
of  the  trunk  lines.  The  coal  is  produced  from  numerous  mines  in  these  limited  areas 
and  is  gradually  collected  by  an  elaborate  system  of  tnmk  lines  into  through  trains 
which  move  either  to  tidewater,  to  the  great  lakes  at  Toledo,  or  to  central  distributing 
points,  like  Cincinnati,  Chicago,  or  Columbus.  From  these  centers  this  coal  is  trans- 
ported to  numerous  destinations  in  the  middle  west  and  the  northwest.  The  gathering 
of  this  fuel  from  the  mines,  its  transportation  in  solid  trains  to  the  central  distributing 
points,  and  its  subsequent  delivery  at  these  points — either  to  vessels  for  water  transpor- 
tation or,  in  relatively  small  quantities,  to  various  connections — constitutes  a  complete 
transportation  operation.  It  requires  highly  specialized  equipment  and  methods  of 
operation,  which  are  essentially  different  from  those  of  other  railroads.  These  processes 
of  coal  transportation  have  been  perfected  through  many  years.  Main  lines  of  the 
highest  standard,  exceptional  equipment  as  to  capacity,  networks  of  feeders,  ex- 
tensive yards  and  terminals,  and  highly  specialized  machinery  for  rapid  and  economic 
unloading,  have  been  provided.  The  demands  for  this  specialized  investment  have 
prevented  encouragement  of  or  participation  in  either  passenger  or  other  freight 
business  than  the  carriage  of  bituminous  coal.  Such  general  traffic  is  bound  to  be 
secondary.  It  should  not  interfere  with  the  eflficient  and  economical  operation  of 
these  roads  as  coal  properties.  To  add  a  great  volume  of  general  trafl[ic  would  confuse 
the  situation.  No  attempt  should  be  made  to  create  general  tnink  lines  out  of  these 
roads;  but  they  should  be  treated,  nevertheless,  as  national  assets,  having  in  view 
their  general  usefulness  to  the  entire  country  and  to  all  of  the  other  railroads.  Oc- 
casionally, perhaps,  a  road,  like  the  Norfolk  &  Western,  may  be  used  to  relieve  con- 
gestion on  the  more  direct  lines  from  the  Atlantic  seaboard  to  Chicago,  but  that  is 
not  its  main  function.  Nor  may  the  Chesapeake  &  Ohio  be  r^arded  primarily  as 
other  than  a  highly  specialized  coal  property. 

The  coal  in  this  territory'  is  distinguishable  into  two  varieties.  One  of  these,  known 
as  fuel  or  smokeless  coal,  is  derived  entirely  from  the  New  River  and  Pocaliontas  fields. 
Having  l)een  subjected  to  greater  geological  pressure  and  heat,  it  more  nearly  approxi- 
mates anthracite.  It  retains  its  form  in  Mocks,  and  does  not  give  out  gas  or  smoke  to 
the  same  degree  as  ordinary  soft  c  )al  Thus  it  is  eminently  fitted  for  bunker  coal  for 
vessels  and  is  suited  to  consumption  industrially  in  densely  populated  territory  where 
the  smoke  nuisance  has  become  a  matter  of  public  concern.  This  coal  heretofore  has 
moved  predominantly  to  the  seal)oard  by  all  three  of  the  Hampton  Roads  lines.  The 
second  variety  of  coal  is  known  as  V)y-product  or  gas  coal.  It  is  also  denominated  as 
low- volatile  coal  to  distinguish  it  from  the  high- volatile  smokeless  sort.  This  coal  is 
found  in  all  the  other  fields  except  the  two  alx)ve  mentioned.  It  has  primarily  been 
consumed  in  central  freight  association  territory  and,  by  way  of  the  great  lakes,  in  the 
northwest.  The  phenomenal  growth  of  this  low-volatile  westbound  coal  traffic,  in  com- 
petition with  the  coal  from  the  other  western  fields,  is  V)rought  out  in  Bituminous  Coal 
to  (\  F.  A.  Territory,  46  I.  C.  C,  66, 123.  Westl)ound  commercial  coal  shipments  on  the 
Norfolk  &  Western  in  1901  were  687,535  tons,  as  compared  with  4,049,817  tons  of  all 
coal  east  bound  on  the  same  road.     This  eastbound  tonnage  was  almost  seven  times  as 

63  I.  C.  C. 


great  as  westbound  in  1901.  But  the  westbound  movement  steadily  grew  proportion- 
ately, despite  the  rapid  expansion  of  eastbound  business.  In  1912,  for  the  first  time, 
westbound  tonnage  of  8,766,102  tons  actually  exceeded  eastbound  coal,  amounting  to 
8,606,270  tons.  Since  that  time  conditions  have  varied,  especially  as  a  result  of  the 
war.  The  normal  tendency  of  coal  movement  westward  was  at  first  reversed.  The 
zoning  program  tended  to  give  the  higher-priced  steam-coal  fields  near  Chicago  a 
regional  monopoly.  The  tide  turned  east  also  ;\ath  demand  from  Europe^and  for  naval 
uses.  And  now  again,  in  1920,  with  industrial  depression  in  the  United  States  and 
falling  prices,  conditions  have  become  more  uncertain  as  to  exports.  Apparently  an 
overdevelopment  of  mining  has  occurred  in  the  Ignited  States,  far  bej^ond  the  present 
or  immediate  future  needs  of  our  domestic  and  foreign  trade. ^  But  the  significant 
point  is  the  fluctuation  of  the  surplus  demand  as  between  the  markets  east  and  west. 
The  growth  of  eastbound  and  westbound  business  on  the  Norfolk  &  Western  is  shown 
by  the  following  statement  of  commercial  coal  and  coke  shipments: 


Period. 


East- 
bound. 


Year  ended  December  31,  1916 
Year  ended  December  31,  1917 
Year  ended  December  31,  1918 
Year  ended  December  31,  1919 
Year  ended  December  31, 1920 

Total  five-year  period 

Yearly  average 


Net  ton*. 
\l,l(yi,ll\ 
16,484,291 
18, 410,  .746 
13, 222. 400 
16,480,516 

82,3a5,527 

16,461,105 


West- 
bound. 


Total. 


Net  tons. 
14,923,207 
14,880,111 
11,470,665 
12,285,071 
10, 465, 197 

64, 024, 251 

12,804,850 


Net  tons. 
32, 630, 981 
31,364,402 
29,881,211 
25,  ,507, 471 
26,945,713 

146,329,778 

29, 265, 9.^ 


The  significance  of  the  foregoing  general  statement  as  to  the  soft-coal  trade  lies 
apparently  in  the  need  of  a  greater  flexibility  as  between  transportation  east  and  west. 
The  surplus  coal  production  above  the  needs  for  consumption  east  and  west — for 
export,  or  for  the  central  west — should  be  free  to  find  its  way  more  readily  in  every 
direction.  This  need  is  accentuated  by  the  difference  in  quality  and  usage  above 
mentioned.  Sometimes  the  slack  in  smokeless  coal  for  export  may  be  taken  up  by 
westbound  movement.  Sometimes  the  opposite  may  occur.  And  the  same  fluctua- 
tion may  occur  independently  for  the  gas  coals.  But  in  either  event,  a  greater  ease 
of  movement  in  both  directions,  and  a  freer  flow  of  coal  to  all  possible  markets  seems 
desirable.  Entire  freedom  of  flow  will  be  produced  only  by  the  utmost  efficiency  of 
the  instruments  of  transportation.  This  efficiency  calls  for  close  coordination  between 
barge  or  vessel  movement  and  car  movement.  It  presupposes  the  free  movement  in 
unbroken  train  units  from  the  mine  to  tide  or  lake  as  the  case  may  be.  The  docks 
should  be  owned  and  operated  by  the  originating  railroad.  Movement  is  interrupted 
by  any  shift  of  operating  control  en  route;  and  particularly  is  it  important  that  every 
railroad  serving  these  coal  fields  should  have  outlets  over  its  own  rails  east  and  west  to 
lake  or  tide.  The  prime  purpose  of  the  accompanying  recommendations  is  to  accom- 
plish this  end,  although  the  acuteness  of  need  varies  as  between  the  several  properties. 

The  Virginian  Railway,  serving  only  the  smokeless  fields,  with  a  market  exclusively 
at  tide,  most  urgently  needs  extension  to  the  great  lakes.  The  phenomenal  growth  of 
its  tonnage  is  disclosed  by  the  following  table  covering  transportation  of  bituminous 
coal  since  1910.  This  movement,  unlike  that  of  the  Norfolk  &  Western,  is  exclusively 
eastbound. 


»  Official  statement,  Railway  Age  Gazette,  December  31, 1920,  page  1149. 
63  I.  C.  C. 


\m 


530 


INTERSTATE   COMMERCE  COMMISSIOX    i.EPORTS. 


CONSOLIDATION    OF   RAILROADS. 


531 


I 


Year  ended— 


Tons. 


Year  endcd- 


JuneSO,  1910 929,752 

June  30,  1911 2,141,009 

June  30,  1912 3, 103, 309 

JuneSn,  1913 3,775,423 

June  30, 1914 4,122,9S7 

June  30,  1915 3,608,390 


June  30, 1916 

December  31, 1916 

December  31, 1917 

December  31, 1918 

December  31, 1919 

December  31, 1920  (est.) 


Tons. 


4,726,ie» 
5,509,79* 
6,398,836 
6,279,289 
5,46:^,321 
7,080,553 


The  need  of  a  western  outlet  for  the  Virginian  has  been  apparent  for  some  years  and,  at 
variom  times  negotiations  have  been  undertaken  for  the  acquisition  of  a  line  to  Lake 
Erie.  The  plan  most  seriously  considered,  and  herewith  recommended,  is  of  consoli- 
dation with  the  Toledo  &  Ohio  Central  and  the  Kanatwha  &  Michigan.  The  location  of 
these  properties  is  shown  upon  the  large  map  9.  Their  present  relation  to  the  New 
York  Central  system,  of  which  they  now  form  a  part,  is  also  indicated  on  map  3  of  that 
system.  Negotiations  with  reference  to  a  lease  were  undertaken  before  the  war  and  a 
price  was  actually  set  by  the  New  York  Central.  Thi^leads  to  the  belief  that,  however 
important  these  lines  are  for  wastem  New  York  Central  fuel  supply,  they  are  not  indis- 
pensable to  their  present  owners 

These  little  properties  have  an  involved  history,  interwoven  with  trunk  line  rela- 
tionships. Between  1890  and  1899  the  Toledo  &  Ohio  Central,  through  stock  owner- 
ship, controlled  and  operated  the  Kanawha  &  Michigan.  During  this  period  the 
Toledo  &  Ohio  Central  and  the  Hocking  Valley  were  competing  roads  in  both  intra- 
state and  interstate  biisiness.  The  Kanawha  &  Michigan  was  dependent  on  either 
the  Toledo  &  Ohio  Central  or  the  Hocking  Valley  for  traffic  north  of  Corning;  and,  if 
used  by  either  the  Toledo  &  Ohio  Central  or  the  Hocking  A'alley,  would  be  u  com- 
petitor with  the  other.  By  reorganization  of  the  Hocking  \'alley  in  1899,  control  of 
the  Toledo  &  Ohio  Central,  the  Zanes\dlle  &  Western,  and  the  Kanawha  &  Micliigan 
was  acquired,  and  was  retained  until  about  1910.  Later  there  were  quo  imrranlo 
proceedings  in  the  Ohio  co.  rts,  resulting  in  tlie  ouster  of  the  Hocking  \'alley  from  the 
control  of  the  Toledo  &  Ohio  Central,  Zanesxille  &  Western,  and  Kanawha  &  Michigan. 
In  complying  with  this  decree,  an  agreement  between  the  Lake  Shore  &  Michigan 
Southern  and  the  Chesapeake  &  Ohio  was  made,  by  which  the  Lake  Shore  «fe  Michigan 
Southern  acquired  all  the  stock  both  of  the  Kanawha  &  Michigan  and  the  Zanesville 
&  Western;  and  the  Chesapeake  &  Ohio  acquired  the  holdings  of  six  trunk  lines  in 
the  Hocking  Valley.  But  it  is  alleged  that  the  Lake  Shore  sought  to  sell  the  Kanawha 
&  Michigan  to  the  Chesapeake  &  Ohio  in  connection  with  these  proceedings.  This, 
again,  con6rms  the  impression  that  these  properties  are  not  indispensable  to  the  New 
York  Central  system. 

The  completion  of  the  Virginian  line  through  to  Toledo  over  the  rails  of  the  above- 
named  corporations  is  physically  a  simple  matter.  The  Kanawha  &  Michigan  at 
Gauley  Bridge  on  the  east  bank  of  the  Kanawha  River,  does  not  connect  with  the 
Virginian  property.  An  easier  mode  of  connection  seeks  to  avoid  the  construction  of 
a  bridge  by  utilizing  a  portion  of  the  Chesapeake  &  Ohio  trackage.  The  local  situa- 
tion is  mapped  herewith.  By  a  short  bit  of  construction  through  the  so-called  Coal 
River  field,  a  connection  is  afforded;  and  at  the  same  time,  a  territory  much  in  need 
of  development  is  opened  up.  The  net  result  of  such  construction  and  trackage  would 
be  to  render  the  Virginian  Railway  a  lake-to-tide  property,  capable  thereafter  of 
offering  its  surplus  smokeless  coal  as  freely  in  western  markets  as  in  the  east. 

The  need  of  extension  of  the  Norfolk  &  Western  to  the  Lake  Erie  water  front  is 
somewhat  less  apparent  than  that  of  the  Virginian.  For  the  Pennsylvania  control 
has  been  productive  of  extraordinary  development.  But  the  growing  volume  of  the 
westbound  coal  business  and  the  desirability  of  independent  operation  from  dock  to 
dock  by  one  management,  lead  to  the  recommendation  that  this  railroad  also  should 

63 1.  0.  C. 


be  given  an  outlet  to  the  lakes  independent  of  the  Pennsylvania  lines.  There  are 
two  ways  of  accomplishing  this  result.  One  is  by  means  of  withdrawal  from  the 
Pennsylvania  system  of  the  line  from  Columbus  to  Sandusky,  separately  designated 
on  map  2.  This  division  was  formerly  the  Columbus,  Sandusky  &  Hocking  Railroad 
and  was  acquired  by  the  Pennsylvania  about  1898.  The  Norfolk  &  Western,  at  that 
time  into  Columbus,  did  not  even  bid  for  it  in  competition;  b  it  at  various  times,  there 


has  been  consideration  given  to  its  possible  lease  to  the  Norfolk  &  AVestern.  This  is 
the  best  line  to  the  lakes;  and  at  Sandusky  large  investments  have  been  made  in 
docks  and  appliances.  But  it  is  a  serious  matter  to  recommend  the  withdrawal  of 
this  important  division  from  so  consolidated  a  system  as  the  Pennsylvania.  For- 
tunately there  is  an  alternative  by  which  an  outlet  to  Lake  Erie  may  be  had  without 
interference  with  the  vested  rights  of  the  Pennsylvania  system  in  the  line  to  Sandusky 
63 1.  C.  C. 


♦•L-P 


I  if  ^1 


532 


INTERSTATE  COMMERCE  COMMISSION   REPORTS. 


CONSOLIDATION  OF  RAILROADS. 


533 


i. 


already  mentioned.  The  Toledo  &  Ohio  Central,  referring  ai^ain  both  to  map  9  and 
the  last  map  in  detail  heretofore,  has  two  lines  across  Ohio.  These  operate  southeast 
of  Columbus,  and  it  has  already  been  recommended  that  the  eastern  division  be  as- 
signed to  the  Virginian  Railway.  The  western  division,  which  passes  through  Colum- 
bus, offers  an  alternative  for  a  lake  line  to  the  Norfolk  &  Western.  It  is  said  not  to  be 
■ju  advantageous  as  to  grades.  At  present^  the  through  coal  movement  avoids  con- 
gestion about  Columbus  and  is  moved  in  \ery  heavy  trainloads  over  the  eastern 
dixTsion.  But  the  western  line  conceivably  could  be  used.  Whether  or  not  it  would 
afford  as  good  an  outlet  as  the  line  to  Sandusky,  which  now  belongs  to  the  Pennsyl- 
vania, is  a  matter  of  detail,  upon  which  decision  is  reserved.  But  there  is  no  doubt 
as  to  the  desirability  of  an  independent  line  for  the  Norfolk  <fe  Western,  one  way  or 
the  other.  The  larger  national  interests  of  the  country  require  the  change.  It  would 
tend  to  relieve  congestion  at  Columbus.  It  would  promote  operating  efficiency  and  it 
would  concentrate  responsibility.  It  woiild  imquestionably  enable  the  Norfolk  & 
Western  better  to  cope  with  the  immense  coal  requirements  of  the  northwest  in  future 
years. 

A  clear  distinction  should  be  made  between  continuing  control  of  the  Norfolk  & 
Western  through  stock  ownership  by  the  Pennsylvania,  and  the  extension  of  the 
Norfolk  &  Western  Railroad  lines  for  their  own  management  from  Columbus  to  the 
lake  front.  As  to  the  claim  of  the  Pennsylvania  for  continuing  control,  it  is 
based  upon  a  number  of  considerations.  The  first  is  that  of  possession  for  the  last  20 
years.  The  Pennsylvania  owns  about  38  per  cent  of  the  common  and  preferred 
stock.  Since  1900  the  Pennsylvania  has  dominated  the  board  of  directors  and  deter- 
mined the  policy.  The  traffic  relations  with  the  Pennsylvania  have  been  becoming 
more  and  more  intimate  with  the  passage  of  time.  During  20  years,  Norfolk  &  Western 
coal  tonnage  has  grown  from  6,000,000  tons  to  30,000,000  tons;  so  that  the  Pennsylvania 
and  the  Norfolk  &  Western  together  originate  roughly  80,000,000  a  year.  The  Norfolk 
&  Western  is  intimately  built  into  the  Pennsylvania,  in  Ohio,  at  Hagerstown,  Md., 
and  at  Norfolk.  The  interchange  with  western  lines  is  predominantly  with  the  Penn- 
syh'ania.  Freight  traffic  delivered  to  the  Pennsylvania  during  1917  was  13,781,129 
tons;  and  the  receipts  from  the  Pennsylvania  were  2,095,665  tons.  This  is  a  total  of 
39.5  per  cent  of  all  the  Norfolk  &  W^estern  freight  interchange  with  all  railroads, 
as  well  as  38  per  cent  of  its  total  freight  traffic.  The  Pennsylvania  uses  the  Norfolk 
&  Western  also  to  relieve  congestion  at  Pittsburgh,  thus  utilizing  the  Norfolk  &  Western 
as  a  detour  through  route.  It  may  also  be  used  for  Pennsylvania  traffic  for  Norfolk, 
V».  Yet  another  claim  of  the  Pennsylvania  is  that  the  West  Virginia  fields  constitute 
a  reserve  to  be  drawn  upon  after  the  exhaustion  of  its  own  Pennsylvania  measures. 
The  Pennsylvania,  it  is  contended,  must  protect  the  enormous  volume  of  industry 
located  in  this  district.  It  is  asserted  that  the  coal  measures  in  its  home  territory 
have  but  a  limited  life  and  that  without  these  reserves  proper  provision  for  the  future 
will  not  be  made.  Careful  inquiry  at  the  Geological  Survey,  however,  indicates  that 
the  re=«r\'e5  strictly  tributary  to  the  Pennsylvania  Railroad  appear  likely  to  last 
for  400  years.  The  life  of  the  Norfolk  &  Western  field  in  the  light  of  its  reserves 
and  the  rate  of  exhaustion  is  reported  to  be  about  550  years.  These  conclusions, 
however,  are  based  upon  the  a^umption  that  the  rate  of  increase  in  consumption 
will  remain  as  at  present  in  the  two  fields.  Inasmuch  as  the  demands  on  the  Penn- 
sylvania field  owing  to  its  proximity  to  Pittsburgh  will  be  continuously  greater  than 
in  West  Virginia  it  seems  more  likely  to  expect  that  the  ratio  of  life  of  the  Pennsyl- 
vania and  the  West  Vir.ginia  district  will  be  more  nearly  as  1  to  2.  It  is  evident, 
however,  that  the  need  of  the  Pennsylvania  Is  at  all  events  not  immediate  and  pressing. 
Xor  is  the  urgency  sufficiently  great  to  support  the  recommendation  that  the  Norfolk  & 
Western  shall  be  consolidated  with  the  Pennsylvania  system.  In  fact,  the  recom- 
mendation of  an  independent  Norfolk  &  Western-Virginian  system,  projected  to  the 

63LC.C. 


lake  front  at  Toledo,  expressly  calls  for  corporate  independence  from  all  trunk  line 
systems.  It  is  doubtful  whether  the  statute  respecting  consolidation  contemplates  the 
severance  of  these  stock  relationships  which  have  subsisted  for  many  years.  This 
particular  Norfolk  &  Western  one  is  analogous  to  the  stock  ownership  of  the  Union 
Pacific  in  the  Illinois  Central.  Is  the  Commission  justified  in  opposing  a  continuance 
of  that  relationship?  Or  must  it  content  itself  with  acceptance  of  the  established 
ownership  as  a  limitation  upon  its  regulatory  powers?  Apparently  a  large  matter 
of  policy  and  interpretation  is  involved,  upon  which  the  Commission  must  make 
decision. 

The  grand  strategy  of  the  Hampton  Roads  properties,  as  above  outlined,  might  still 
be  attained  by  one  modification  as  to  detail.  Were  the  Virginian  and  the  Norfolk  & 
Western  to  be  consolidated,  not  only  might  a  single  outlet  to  Lake  Erie  be  developed 
for  J)Oth,  but  also  a  number  of  operating  economies  might  be  effected.  The  terminals 
of  the  two  roads  are  adjacent  at  Norfolk,  Va.  The  Virginian,  as  the  map  shows,  also 
closely  parallels  the  Norfolk  &  Western  practically  from  the  coal  fields  to  tidewater. 
The  two  lines  could  be  operated  jointly  to  facilitate  the  movement  of  tonnage.  The 
district  director  under  the  federal  Railroad  Administration  turned  the  eastbound 
tidewater  coal  of  the  Norfolk  &  Western  onto  the  Virginian  at  Roanoke  and  moved  it 
over  that  line  to  escape  the  Blue  Ridge  summit  and  grade;  and  ran  the  Virginian 
westbound  movement  over  the  Norfolk  &  Western.  The  lines  were  thus  used  in 
common  for  about  100  miles,  and  in  any  event,  either  could  be  used  as  a  detour  line  in 
cases  of  obstruction  upon  the  other.  Both  roads  tap  the  same  coal  measures,  low 
volatile  and  high  volatile.  Their  output,  therefore,  is  interchangeable  in  an  emergency 
at  their  junction  6  miles  west  of  Norfolk.  None  of  these  advantages  of  unified  opera- 
tion are  applicable  to  the  Chesapeake  &  Ohio  and  either  of  the  other  roads.  To  com- 
bine the  Chesapeake  &  Ohio  and  the  Norfolk  &  Western  would  put  an  end  to  keen 
comj)etition.  It  would  permit  of  no  economies  in  operation.  Any  proposal,  there- 
fore, to  group  the  Hampton  Roadff  properties  more  closely  should  take  the  form  of 
alliance  of  the  Virginian  and  the  Norfolk  &  Western. 

One  other  possibility  nierits  consideration.    Combination  of  the  Virginian  and  Nor- 
folk &  Western,  in  order  to  perpetuate  the  operating  economies  at  the  tidewater  end 
which  were  utilized  under  federal  control,  has  abeady  been  suggested.    Were  these 
two  to  be  combined,  the  two  lines  of  the  Toledo  &  Ohio  Central,  already  described, 
might  be  worked  for  the  joint  benefit  of  them  both  as  thus  consolidated.    These  lines 
were  all  formerly  operated  in  a  pool  with  the  Hocking  Valley  in  somewhat  the  manner 
•suggested.    The  agreement  under  which  the  Lake  Shore  acquired  the  Toledo  &  Ohio 
Central  provided  for  an  equal  division  between  this  road  and  the  Hocking  Valley 
•of  the  coal  traffic  derived  from  the  Kanawha  &  Michigan.    And,  certainly,  trackage 
rights  were  given  to  the  Hocking  Valley  over  the  Kanawha  &  Michigan.    But  pro- 
ceedings in  the  Ohio  courts  about  1907,  and  subsequently  in  the  federal  courts  about 
1914,  tended  to  break  up  the  pooling  operation.    The  federal  decree,  and  now  the 
agreement  between  the  Lake  Shore  and  the  Chesapeake  &  Ohio,  have  required  that 
the  latter  road  should  sell  its  stock  in  the  Kanawha  &  Michigan  to  the  Lake  Shore. 
Incidentally,  the  joint  use  of  the  Hocking  Valley  and  Toledo  &  Ohio  Central  was 
discontinued  for  through  traffic  except  by  ordinary  interchange.    The  signifcance 
of  this  history  is  that  it  seems  to  indicate  a  possibly  advantageous  cooperative  activity, 
and  the  reversal  of  federal  policy  concerning  railroad  pooling  by  the  transportation 
act  of  1920,  apparently  opens  the  way  to  a  renewal  either  of  joint  operation  under 
control  of  the  Interstate  Commerce  Commission  or  of  actual  merger.    Thus,  in  brief, 
choice  may  be  made  between  three  possibilities.    The  first  is  to  take  the  Sandusky 
line  for  the  Norfolk  &  Western  from  the  Pennsylvania  system.    The  second  is  to  choose 
■instead  the  western  division  of  the  Toledo  &  Ohio  Central,  still  keeping  the  Norfolk 

.&  Western  independent.    And  the  third  is  to  combine  the  Virginian  and  the  Norfolk 
63 1.  C.  C. 

63763—21 6 


III 


»iu. 


:,f:i 


534 


INTERSTATE  COMMERCE  COMMISSION   REPORTS. 


CONSOLIDATION    OF  RAILROADS. 


535 


hi      f 


&  Western  and  use  the  Toledo  &  Ohio  Central  and  the  Kanawha  &  Michigan  inter 
changeably  for  both. 

The  part  played  in  modem  industry  and  in  our  domestic  and  foreign  trade  by 
bituminous  coal  makes  it  imperative  that  all  fetters  to  freedom  of  movement  be 
released.  The  enormous  and  rapidly  growing  product  of  this  region,  indispensable 
to  the  entire  country  both  in  peace  and  war,  is  by  this  plan  made  accessible  on  more 
nearly  equal  terms  than  at  present  to  all  five  of  the  trunk  line  groups.  By  producing 
the  two  lines,  which  now  fall  short  of  completion,  through  to  Lake  Erie,  every  trunk 
line  is  afforded  a  direct  connection  and  an  opportunity  to  participate  on  more  nearly 
equal  terms  than  at  present  in  any  movement  east  and  west  from  these  particular 
lines.  To  afford  such  direct  connection  with  the  main  stem  of  everv-  trunk  line  is 
the  underlying  principle  of  these  recommendations. 

A  word  further  in  another  connection  as  to  the  Chesapeake  <^  Ohio.  Map  9  indicates 
how  conveniently  this  property  may  be  extended  to  St.  Louis  by  assignment  to  it  of 
the  Louisville-St.  Louis  division  of  the  Southern  Railway.  This  would  make  the 
Chesapeake  &  Ohio  really  a  trunk  line,  commensurate  as  to  scope  with  the  five  trunk 
lines  farther  north.  In  other  words,  it  would  tap  both  Chicago  and  St.  Louis.  But, 
on  the  other  hand,  choice  has  to  be  made  as  against  the  conflicting  interest  of  St. 
Louis  in  the  Southern  Railway.  This  point  is  discussed  subsequently  in  chapter  IV. 
On  the  whole,  it  seems  more  desirable  that  no  positive  recommendation  for  divorce  of 
this  line  from  the  Southern  Railway  should  be  made.  But  the  desirability  of  a  future 
trunk  line  to  St.  Louis  from  Hampton  Roads,  by  independent  construction  can  not 

be  doubted. 

The  statistical  results,  so  far  as  they  may  be  predicated,  for  the  several  Chesapeake 
Bay  systems  are  disclosed  by  statistical  exhibit  4.  These  figures  indicate  that  the 
Virginian  is  only  about  a  third  the  size  of  either  of  the  other  two.  In  mileage  the 
Chesapeake  &  Ohio  leads,  but  in  terms  of  revenue  ton-miles  and  operating  revenue  the 
Norfolk  &  Western  stands  at  the  head.  The  significant  figure  is  afforded  by  the  per- 
centage of  net  operating  income  to  investment.  Here  it  appears  that  the  Chesapeake 
&  Ohio  approximates  the  normal  at  5.46  per  cent.  But  the  Norfolk  &  Western 
including  the  Columbus  division  of  the  Toledo  &  Ohio  Central,  earned  7.18  per  cent 
on  its  investment  in  1917.  Coincidently,  the  Virginian  with  the  Kanawha  & 
Michigan  and  the  eastern  part  of  the  Toledo  &  Ohio  Central  were  substantially  below 
normal,  with  net  operating  income  in  1917  of  only  3.91  per  cent  on  investment.  In 
other  words,  the  Virginian  system,  as  herein  proposed  independently,  is  just  about  as 
far  below  normal  earning  capacity  as  the  Norfolk  &  Western,  as  herein  constituted,  is 
above  it.  Were  these  two  systems  to  be  combined,  there  would  be  an  ideal  conformity 
to  the  financial  requirements  of  the  transportation  act.  A  weak  and  a  strong  road, 
lying  in  the  same  territory  and  naturally  interrelated  would,  if  put  together,  only 
slightly  exceed  in  earning  power  percentually,  the  rival  system  of  the  Chesapeake  & 
Ohio.  The  rates  of  return  respectively,  are  5.46  and  6.18  per  cent.  In  view  of  this 
fact  and  of  the  economy  demonstrated  as  feasible  under  federal  administration,  as 
hereinbefore  described,  it  is  finally  recommended  that  these  two  systems,  the  Vir- 
ginian and  the  Norfolk  &  Western,  should  be  consolidated  under  this  plan.  This  pro- 
posal was  heretofore  made  only  as  a  possible  alternative.  But  these  statistical 
returns,  since  received,  confirm  the  belief  that  this  is  the  proper  procedure  under  the 
act.  The  joint  utilization  of  the  two  lines  of  the  Toledo  &  Ohio  Central  and  of  the 
Kanawha  &  Michigan  might  also  at  the  same  time,  greatly  promote  efficiency  and  the 
satisfaction  of  public  needs.  The  companies  should  be  protected  also  in  pooling 
operations  under  federal  supervision,  and  afforded  protection  against  interference  by 
the  authorities  of  the  state  of  Ohio,  in  case  its  law  is  not  amended  to  conform  to  a 

broad-gauge  federal  policy. 

63 1.  C.  C. 


Chapter  IV. — The  Southeastern  Region. 

Southern  transportation  conditions  contrast  sharply  with  trunk  line  and  western 
situation,  535.— East-and-west  division  by  the  Allegheny  range,  536.— Oreater 
unity  recently  promoted  by  railroad  systems,  especially  the  Southern,  536.— 
Unity  somewhat  less  apparent  between  Louisville  &  Nashville  and  Atlantic  Coast 
Line,  537.— Mutuality  of  interest  lacking  between  Illinois  Central  and  Seaboard 
Air  Line,  537. — ^Main  stems  (map)  as  indicating  unity  of  southern  systems,  537. — 
Statistical  comparison  of  the  four  leading  systems,  538.— Southern  seaport  devel- 
opment and  railroad  policy,  538. 
The  Southern  Railway  system  logical  and  compact,  539.— Relation  to  the  Mobile  & 
Ohio,  539.— Decisive  objections  to  transfer  of  the  Lomsville-St.  Louis  division, 
540.— Corporate  structure  of  the  Queen  &  Crescent  1  ine,  540.— Relation  to  the 
Carolina,  Glinchfield  &  Ohio,  341.— The  Georgia  Southern  &  Florida  and  New 
Orleans  Great  Northern  included,  541. 
The  Louisville  &  Nashville  as  a  complete  and  satisfactory  system,  542.— Interest  in 
the  Atlanta,  Birmingham   &   Atlantic,  542.— Division   of   the  field  between 
Atlantic  Coast  Line  and  the  Southern  Railway  in  relation  thereto,  543.— The 
Georgia  &  Florida  Railway  and  the  Atlanta-Montgomery  lines  considered,  also  the 
Norfolk  Southern,  544.— Divorce  of  the  Monon,  545.— Addition  of  the  Winston- 
Salem  branch  of  the  Norfolk  &  Western,  545.— Proposal  to  actually  merge  the 
Louisville  &  Nashville  and  the  Atlantic  Coast  Line  Railway,  546. 

Shall  the  Seaboard  Air  Line  system  remain  independent?  546.— Relation  to  the  Geor- 
gia Southern  &  Florida  Railway,  547.— Addition  of  the  Durham  branch  of  the 
Norfolk  &  Western  Railway,  547. 

Inherent  strength  of  the  Illinois  Central  system,  548.— The  proposal  to  dissociate 
the  western  line  across  Illinois  and  Iowa  rejected,  548.— Possible  incorporation 
of  the  Memphis-Birmingham  division  of  the  Frisco  system,  549. — The  Yazoo  & 
Mississippi  Valley  road  left  undisturbed,  550. 

The  Carolina,  Clinchfield  &  Ohio  road  as  strategically  located,  550.— Its  relation  to 
southeastern  coal  supply,  551.— Importance  as  a  connection  for  neighboring  rail- 
roads, 551.— Development  of  its  traffic  relationships,  552.— Merger  with  Southern 
Railway,  reserving  trackage  rights  for  others,  recommended,  553. 

The  Washington-Richmond  to  remain  a  joint  line  as  at  present,  554. 

The  Florida  East  Coast  Railway  to  remain  an  independent  bridge  line,  555. 

Statistical  confirmation,  555. 

Southeastern  territory,  south  of  the  Ohio  and  Potomac  rivers  and  east  of  the  ^lissis- 
sippi,  contrasts  sharply  as  respects  transportation  conditions  both  with  the  trunk 
lines  and  with  the  west.    Population  is  sparse,  and  traffic  is  both  light  and,  to  a  con- 
siderable degree,  seasonal  in  character.     There  is  relatively  little  local  business. 
Much  of  the  traffic  is  for  a  long  haul,  either  of  raw  products— cotton,  lumber,  or  garden 
truck— northbound;  or  foodstuffs  and  manufactures  in  the  opposite  direction.    Form- 
erly there  was  widespread  water  competition;  but,  except  for  the  extended  coast- 
wise service,  this  has  now  become  relatively  insignificant.    The  numerous  rivers  and 
the  encircling  seaboard  have,  however,  profoundly  affected  the  historical  develop- 
taeut  of  its  transportation  system,  from  which  there  has  resulted  many  of  the  existing 
corporate  relationships.    Most  of  the  railways  have  been  constructed  not  so  much  in, 
as  into  the  interior  of  this  region.    Such  lines  have  penetrated  either  from  the  seaports 
Charleston,  Savannah,  and  New  Orleans,  or  else  the  existing  systems  have  penetrated 

63 1.  C.  C. 


it 


536 


INTERSTATE  COMMERCE  COMMISSION  REPORTS. 


CONSOLIDATION  OF  RAILROADS. 


537 


by  extension  from  the  Virginia  or  the  Ohio  River  gateways.  Such  at  least,  if  not  the 
process  of  original  construction,  has  been  the  trend  of  consolidation.  And  with  the 
improvement  of  rail  transportation  and  the  gradual  supersession  of  carriage  by  water, 
emphasis  has  been  laid  upon  the  stems  penetrating  the  south  from  the  north  rather 
than  upon  some  of  the  rail  lines,  equally  significant  historically,  which  were  built 
upon  the  surrounding  seaports  like  Savannah  or  Charleston  as  bases. 

A  bird's  eye  view  of  southeastern  territory  shows  that  it  is  divided  geographically 
down  the  middle  from  northeast  to  southwest,  parallel  with  the  coast,  by  the  Alle- 
gheny mountain  range.  From  Atlanta  south,  there  is  no  discernible  separation  into 
east  and  west;  but  from  Atlanta  north,  the  railways  of  this  territory  have  first  gradually 
extended  themselves  more  or  leis  parallel  with  this  mountain  barrier.  On  the  east, 
within  a  quarter  century,  there  resulted  three  distinct  syetens;  namely,  that  of  the 
Southern  Railway,  of  the  Atlantic  Coast  Line,  and  of  the  Seaboard  Air  Line.  In 
the  western  section,  transportation  was  pro\'ided  primarily  by  the  Illinois  Central 
and  the  Louisville  &  Nashville  railroads.  The  predominant  direction  of  traffic  on 
the  one  side  of  the  AUeghenies  differs  radically  from  that  on  the  other.  On  the 
Mississippi  side  the  preponderance  is  southbound,  consisting  of  bulky  foodstuffs; 
but  along  the  eastern  continental  shelf  both  bulk  and  value  of  tonnage  are  greater 
toward  the  north.  The  recent  phenomenal  growth  of  trafl3c  in  citrus  fruits  and  of 
fresh  vegetables,  northbound,  tends  to  balance  up  conditions  in  the  western  half  and 
still  further  to  overthrow  the  balance  east  of  the  AUeghenies.  Each  slope  of  the 
Alleghenies  was  originally  more  or  less  distinct  in  its  transportation  problems,  and 
there  was  very  little  interrelation  between  the  two.  Twenty-five  years  ago  one  might 
consistently  have  divided  the  south  into  two  subdistricts  for  purposes  of  railroad 
consolidation.  But  the  events  of  the  succeeding  decades  have  profoundly  modified 
these  conditions. 

Since  1900,  for  transportation  purposes,  the  south  has  developed  a  far  greater  ter- 
ritorial unity  than  it  possessed  before  that  time.  The  growth  of  population  and  the 
development  of  traffic  in  lumber  and  products  of  the  soil  in  the  great  coastal  plain 
between  Atlanta  and  the  Gulf,  together  with  the  intensive  development  of  Florida, 
have  tended  to  overcome  the  separateness  of  interest  which  formerly  obtained  between 
the  eastern  and  the  western  groups  of  roads  within  this  region.  Each  half  has  become 
more  dependent  upon  the  other,  and  particularly  has  the  large  volume  of  traffic  from 
south  of  Savannah  and  Macon  tended  to  move  impartially  either  east  or  west  of  the 
great  wedge  of  mountains  which  penetrates  down  through  the  middle  almost  to 
Atlanta.  Instead  therefor^  of,  as  formerly,  more  or  less  parallel  and  competing  routes 
into  and  out  of  the  south  through  the  Virginia  and  Ohio  River  gateways  respectively, 
there  has  now  come  about  a  large  movement  of  business  which  cuts  diagonally  in 
either  direction  clear  across  this  area.  The  through  routes  depicted  on  map  27  bring 
this  out  clearly.  Through  routes  from  New  Orleans  to  the  Potomac  gateways  trend 
northeasterly;  and  similar  through  routes,  especially  for  the  carriage  of  Florida  prod- 
ucts and  lumber,  trend  northwesterly  from  Jacksonville  toward  St.  Louis.  Each 
half  of  the  south,  east  and  west,  is  therefore  to-day  much  more  closely  bound  to  the 
other  by  the  ties  of  trade  than  a  generation  ago.  And  the  great  railway  companies 
have  followed  these  lines  of  commerce,  extending  their  systems  from  either  direction 
to  cover  the  entire  region  with  a  single  railway  net.  Thus,  conformably  to  the  trade 
relationships  above  described,  the  Southern  Railway  was  the  first  to  emerge  as  a 
group.  ramif>-ing  throughout  the  entire  extent  of  the  southeast.  Beginning  in  the 
nineties,  its  lines  were  steadily  extended  until  at  this  time  it  reaches  every  important 
section,  with  the  sole  exception  of  parts  of  Florida.  Its  system  is  in  nowise  separable 
in  interest  into  an  eastern  or  a  western  half;  but  its  important  through  lines  connect 
all  of  the  extremities  of  this  vast  territory. 

63LO.C. 


A  co.Tiplete  identity  of  interest  between  the  eastern  and  the  western  halves  of  the 
south  is  not  quite  so  apparent  with  the  next  great  existing  combination,  that  of  the 
Louisville  &  Nashville  and  the  Atlantic  Coast  Line.    Historically  these  two  halves 
remained  entirely  distinct  until  1902;  when,  as  a  result  of  a  speculative  coup,  the 
Louisville  &  Nash\ille  was  acquired  through  stock  ownership  by  the  Atlantic  Coast 
Line.    Since  this  time  these  two  properties  have  evolved,  not  so  much  as  allies,  as 
integral  parts  of  one  and  the  same  great  sj^stem.    The  first  appearance  of  rank  arti- 
ficiality in  this  relationship  has  to  a  considerable  degree  yielded  place  to  an  identity 
of  interest,  particularly  arising  from  the  intensive  development  in  southern  Georgia 
and  Florida.    For  all  this  region  there  is  the  same  need  of  free  movement  for  the  long 
haul,  either  east  or  west  of  Atlanta,  that  is  manifested  in  the  great  diagonal  currents 
of  traffic  in  the  Southern  Railway  system.    To  resolve  this  existing  combination  into 
its  original  constituent  parts  before  1902,  namely,  once  more  to  divide  the  united 
system  into  an  eastern  and  a  western  subdivision,  would  not  contribute  to  the  free 
movement  of  traffic,  nor  would  it  preserve  existing  routes  and  channels  of  trade,  as 
the  statute  contemplates.    It  is  clear  that  for  this  second  great  existing  combination, 
as  well  as  for  the  Southern  Railway,  it  must  be  regarded  as  having  established  its 
right  to  unity  as  it  stands. 

Tne  remaining  large  systems  in  the  southeast  are  those  of  the  Illinois  Central  and 
the  Seaboard  Air  Line  Railway,  respectively.  Is  there  any  identity  of  interest 
between  these  widely  separated  properties,  and  is  a  like  disposition  manifested  b>' 
either  to  extend  across  and  bind  the  two  halves  of  the  south  more  closely  together? 
That  is  an  important  matter  to  decide.  For  upon  it  will  depend  the  choice  between 
four,  or  three,  independent  systems  in  the  southeastern  territory.  To  unite  these 
two,  would  provide  only  three  great  consolidations.  To  leave  them  separate  would 
require  the  constitution  of  four. 

The  location  of  the  backbo  les  or  stems  of  the  principal  southern  systems  is  shown 
by  map  27.    This  brings  out  rather  strikingly  the  manner  in  which  the  eastern  and  the 
western  halves  of  this  region  are  indissolubly  bound  together  by  the  diagonal  route, 
which  meet  and  cross  one  another  at  Atlanta.    A  great  parallelogram  is  depicted 
with  Richmond,  St.  Louis,  New  Orleans,  and  Jacksonville  at  the  four  corners— Cin- 
cinnati and  Louisville  being  midway  of  the  northern  side.    Three  at  least  of  the 
four  southern  systems  pretty  completely  cross  this  territory  competitively,  either 
from  Richmond  toward  New  Orleans,  or  from  Jacksonville  to  the  northwest  through 
Atlanta.    Thus  there  are  the  two  main  Southern  Railway  stems  as  diagonals  of  this 
territory;  and  against  them  there  are  the  competitive  lines  of  the  Louisville  &  Nash- 
ville, although  the  Atlantic  Coast  Line  division  makes  a  somewhat  wider  sweep 
toward  the  sea,  leaving  the  Southern  Railway  as  distinctly  an  interior  system.    Such , 
indeed,  the  Southern  Railway  was  planned  to  be.    And  in  thus  refraining  from 
development  of  branches  and  feeders  in  Florida,  there  is  evidence  of  a  division  of 
the  field  with  the  Louisville  &  Nashville-Atlantic  Coast  Line,  so  richly  represented 
in  the  Flori.la  peninsula.    The  Southern  system  and  that  of  the  Louisville  &  Nash- 
ville-Atlantic Coast  Line  are  the  most  comprehensively  developed,  and  the  remaining 
two  systems,  under  this  plan  are  substantially  more  localized.    The  Illinois  Central 
is  unsurpassed  in  its  possession  of  a  great  north-and-south  direct  trunk  line,  but  it 
is  yet  somewhat  handicapped  in  its  approach  to  the  seaboard  at  Savannah  over  the 
controlled  lines  of  the  Central  of  Georgia  Railway.    The  Seaboard  Air  Line  (map  13) 
on  its  part  gives  the  appearance  of  overextension,  being  relatively  so  thin  in  feeders. 
But  its  main  stem  from  Richmond  through  Savannah  to  Tampa  is  a  fair  parallel  and 
competitor  for  the  eastern  stem  of  the  Atlantic  Coast  Line.    Summarily  therefore 
this  layout  discloses  a  fairly  comprehensive  competitive  situation  except  in  one 
r^ard.    Between  almost  all  of  the  strategic  points  there  are  two  fairly  evenly  bal- 
anced systems  except  as  against  the  Illinois  Central  main  line  from  Chicago  to  New 
63 1.  C.  C. 


I*  1 


•iw 


538 


INTERSTATE  COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


539 


M 


Orleans.  That  is  unparalleled  to  New  Orleans.  The  nearest  direct  competitor  is 
the  line  of  the  Mobile  &  Ohio  (in  the  Southern  system)  to  the  rival  port  of  Mobile, 
and,  as  will  hereafter  appear,  this  property  is  hardly  integral  in  the  Southern  Railway 
as  an  interior  system.  Its  final  disposition  is  one  of  the  knotty  problems  presented 
by  the  south. 

The  comparative  financial  status  of  the  six  learling  southeastern  railways,  as  sepa- 
rately reported  to  the  Interstate  Commerce  Commission,  for  1017,  is  as  follows: 


Carrier. 


\  tlantic  Toast  Line 

IlUnois  retitral 

Louisville  <fe  Xashville 

SealwaM  MrT.ine 

So.ithern  Railway 

Carolina,  Clinchfield  <<:  Ohio 


Investment 

Railway 

Net 

in  road  and 

operating 

operatinj; 

equipment 

revenue 

income 

per  mile  of 

per  mile  of 

per  mile  of 

Une. 

line. 

line. 

S38,S84 

$9,151 

$2,131 

71,115 

18,127 

3,417 

63,297 

15,160 

3,412 

55,602 

8,766 

1,877 

1          77,202 

12,991 

2,671 

I        189,ft27 

13,411 

.5,073 

Percentage 
relation: 
net  operat- 
ing income 
to  invast- 
ment. 


5. 51 
5.17 
.5.R5 
3.44 
3.87 
2.75 


A  matter  of  fundamental  importance,  concerning  not  alone  the  southeastern  states, 
but  the  entire  middle  we=^t.  is  the  future  development  of  the  seaports  on  the  south 
Atlantic  and  in  the  Gulf  of  Mexico.  An  addel  significance  accrues  from  the  probable 
future  of  the  Panama  Canal  and  the  entry  of  the  rnited  States  into  the  field  of  inter- 
national competition  throigh  the  creation  of  a  great  merchant  marine.  The  trend 
of  both  export  and  import  traTic  has  always  been  much  stronger  through  the  north 
Atlantic  ports  than  elsewhere;  and  the  power  and  influence  of  the  trunk  lines  has 
tended  in  the  pa.st  to  work  all  traffic  east  rather  than  south.  But  a  great  and  growing 
interest  among  manufactiu-ers  in  the  Miasi.ssippi  Valley  is  manifested  in  the  possible 
movement  of  their  products  southward  rather  than  due  east  to  the  sea.  Manufacturers 
in  Ohio  or  Michigan  have  in  the  past  found  themselves  limited  to  export  by  way  of 
New  York  or  other  north  Atlantic  ports;  but  they  are  now  clamoring  through  various 
associations  for  the  right  to  make  use  of  the  ships  which  have  come  in  to  New  Orleans 
or  other  southern  ports  laden  perhaps  with  potash,  guano,  nitrates,  coffee,  or  what  not, 
for  the  return  carriage  of  these  American  goods  abroad.  It  is  not  abnormal  for  such 
manufactures  to  move  out  of  Michigan  by  way  of  New  York;  but  there  ought  to  be 
substantial  equality  of  opportunity  to  ship  the  product  through  New  Orleans;  and 
this  is  particularly  the  case  from  points  further  south,  like  Chattanooga,  Tenn.  It  is 
surely  anomalous  that  Chattanooga  should  alone  reach  South  America  via  New  York 
when  a  great  volume  of  superfluous  empty  cars  is  continually  moving  south  to  the 
Gulf.  The  predominant  loaded-car  movement,  as  has  already  been  pointed  out,  is 
northward.  Every  encouragement  should  be  offered  to  fill  these  return  southbo  ind 
empties  with  exports,  thereby  encouraging  the  development  of  the^new  routes  and 
seaports  in  this  entire  southeastern  territory. 

Obviously  the  movement  of  such  export  or  import  traffic  depends  upon  a  number 
of  factors.  One  is  the  rate;  another  the  facilities— through  service,  billing,  tracing— 
the  terminals,  shops,  etc.;  and  the  third  is  the  peculiar  incentive  which  comes  from 
a  large  investment  by  a  particular  carrier,  which  alone  can  be  made  productive  by 
the  development  of  new  business.  Several  occurrences  latterly  betoken  an  appre- 
ciation by  the  railroads  of  the  importance  of  this  import  and  export  business  through 
the  south.  One  was  the  equalization  of  export  and  import  rates  by  the  federal  Rail- 
road Administration  through  its  orders  of  December  1  and  31,  1919.  This  granted 
an  equality  of  opportunity  from  central  freight  association  territory  by  either  route, 
south  or  east,  to  the  seaboard.  No  such  equalization  of  rates  for  domestic  carriage 
has  however  occurred.    Evidently  a  perpetuation  of  this  policy  of  equalizing  expor  t 

63 1. 0.  C. 


and  import  rates  will  work  for  the  development  of  the  southern  seaports.  Another 
very  recent  occurrence  is  the  announcement  on  behalf  of  northern  and  southern  Uneg 
in  January,  1921,  that  for  the  first  time  joint  through  rates  would  be  granted  which 
should  be  on  a  differential  basis,  substantially  lower  than  the  combination  of  local 
rates  based  on  the  Ohio  River.  All  class  and  commodity  rates  for  export  are  ultimately, 
it  is  understood,  to  be  adjusted  on  this  basis.  This  action,  as  an  evidence  of  complete 
accord  between  the  trunk  line  and  southern  carriers,  meeting  at  the  Ohio  River 
gateways,  appears  to  lessen  the  necessity  for  an  extension  of  the  southern  lines,  which 
now  stop  at  the  Ohio  River  gateways,  into  Chicago.  But  it  must  be  conceded  that  the 
tug  of  the  trunk  lines  for  certain  products,  especially  grain,  is  still  greatly  enhanced 
by  the  existence  of  water  competition  on  the  great  lakes.  As  long  as  the  superior 
trunk  line  facilities  and  the  lake  competition  obtain  the  southern  ports  are  bound  to 
operate  under  a  handicap.  But  the  growing  importance  of  the  Panama  Canal  will 
doubtless  lessen  this  in  future.  It  is  elsewhere  recommended  that  the  railroads 
from  the  Gulf,  west  of  the  Mississippi,  should  be  extended  into  Chicago  for  reasons 
therein  stated.  But  for  the  southeastern  territory  it  is  not  believed  that  so  doing 
would  greatly  conduce  to  the  furtherance  of  this  southern  seaboard  movement.  That 
must  depend  largely  upan  other  factors  than  those  arising  from  consolidation. 

The  Southern  Railway  system  as  at  present  constituted  has  so  admirably  restrained 
itself  against  overexpansion,  so  thoroughly  consolidated  its  hold  upon  the  field 
within  which  it  is  best  fitted  to  serve,  and  has  so  far  contributed  to  the  upbuilding 
of  the  south,  incidentally  increasing  its  own  revenues  thereby,  that  it  will  be  little 
disturbed  by  this  general  plan  for  railway  consolidation.     In  one  respect  only  is  it 
perhaps  overextended,  that  is  to  say,  in  having  entered  into  a  field  foreign  to  its 
primary  interests.    This  was  the  acquisition,  through  purchase  of  $5,670,200  of  the 
entire  capital  stock  amounting  to  $6,016,800,  of  the  control  of  the  Mobile  &  Ohio 
Railroad.     The  relation  geographically  between  the  two  properties  is  shown  on  map 
10.     The  Mobile  &  Ohio  stock  was  originally  purchased  in  1901,  at  a  time  when  the 
community  of  interest  principle  was  being  actively  pressed  by  powerful  banking 
interests.    It  seems  to  have  been  thought  that  rate  cutting  in  this  territory  might 
be  stopped  through  its  absorption  by  some  powerful  system.     It  could  not  be  allo- 
cated to  the  Louisville  &  Nashville  or  to  the  Illinois  Central  on  account  of  local 
opposition  in  the  Mississippi  Valley  to  the  merger  of  competitive  lines,  and  the  only 
property  which  it  did  not  seem  to  parallel  directly  was  the  Southern  Railway.    But 
it  seems  to  have  served  its  present  owners  but  little.    It  has  never  yielded  a  return 
upon  the  investment.    All  the  earnings  have  been  absorbed  in  necessary  improve- 
ments    The  Southern  Railway,  in  pursuance  of  its  policy  of  developing  itself  as 
to  interior  property,  would  apparently  welcome  its  transfer  and  utilization  through 
other  connections.    But  until  positive  advantages  may  be  discovered,  not  as  yet 
revealed  by  investigation,  there  seems  no  course  open  other  than  to  recommend  its 
continuance  as  at  present.    Several  suggestions  have  been  made  for  disposition  of 
the  Mobile  &  Ohio,  some  of  which  are  elsewhere  discussed  in  this  chapter.    The 
most  notable  is  the  proposal  to  combine  it  with  the  Atlanta,  Birmingham  &  Atlantic, 
connecting  the  two  by  trackage  between  Tuscaloosa  and  Birmingham  (map  10). 
Then  it  is  proposed  to  turn  the  two  over  to  the  Burlington-Northern  Pacific  system 
in  order  to  give  that  western  combination  a  line  to  a  south  Atlantic  seaport,  which 
would  match  the  existing  facilities  enjoyed  by  the  Union  Pacific  through  its  control 
of  the  Illinois  Central  and  the  Central  of  Georgia  (map  12).    This  arrangement  would 
afford  the  two  great  middle-western  transcontinental  systems  through  lines  to  Bruns- 
wick and  Savannah,  Ga.,  respectively.    But  this  proposal  is  too  far-reaching  for 
acceptance  without  further  consideration  of  the  effect  upon  the  southeastern  situa- 
tion as  a  whole. 

63  I.  C.  C. 


••u 


640 


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CONSOLIDATION   OF  RAILROADS. 


541 


The  proposal  to  utilize  the  St.  Louis- Louisville  division  of  the  Southern  Railway 
lor  extension  of  the  Chesapeake  &  Ohio  to  a  western  strategic  base  at  St.  Louis  has 
been  already  considered  (page  533,  supra).  Subsequent  to  the  decision  already 
reached,  not  to  disturb  existing  arrangements,  considerable  further  evidence  upon 
the  point  has  been  assembled.  The  advantage  to  the  Chesapeake  &  Ohio  is  apparent. 
This  would  constitute  it  a  trunk  line  to  both  of  the  great  western  gateways.  Judging 
by  the  map,  no  more  direct  connection  to  St.  Louis  could  be  had.  It  is  almost  an 
air  line,  and  financially  it  seems  to  be  of  little  value  to  the  Southern  system.  Fur- 
thermore, it  conforms  to  the  policy  of  the  Southern  Railway,  already  exemplified 
in  the  recommended  transfer  of  the  Monon  to  the  Baltimore  &  Ohio,  of  restricting 
itself  to  its  own  native  territory-  south  of  the  Ohio  Rivei;.  The  proposition  is  not 
vigorously  opposed  by  the  present  holders  of  the  line,  and  a  certain  advantage  to* 
the  Chesapeake  &  Ohio  is  recognized  by  its  management.  But  there  are  substantial 
objections  which,  as  stated,  are  believed  to  be  sufficient  to  commend  a  continuation 
of  the  present  relationship  rather  than  a  change. 

Among  the  objections  to  transfer  of  the  Louisville  division  from  the  Southern  Rail- 
wav  is  the  character  of  the  Chesapeake  &  Ohio  line  in  Kentucky  from  Ashland  om 
the  Ohio  River  across  by  way  of  Lexington  and  entering  Louisville  from  the  east. 
This  is  a  mountain  line,  with  heavy  grades  and  curvatures,  little  suited  to  the  car- 
riage of  the  heavy  traffic  of  a  coal  railroad.  If  the  Chesapeake  &  Ohio  ever  is^ 
extended  to  St.  Louis,  it  should  do  so  under  conditions  permitting  of  heavy  train - 
loads.  There  are,  moreover,  several  important  traffic  objections  to  the  change;. 
St.  Louis  shippers,  through  their  organization,  evidently  prize  highly  the  throughi 
car  and  billing  arrangements  by  means  of  which  the  great  mileage  of  the  Southern 
Railway  is  directly  reached.  Much  of  the  traffic  on  this  <6vision,  except  local  busi- 
ness, is  of  origin  or  to  destination  not  served  at  all  by  the  Chesapeake  &  Ohio,  but 
served  by  the  Southern  Railway  or  its  connections.  And  it  is  alleged  that  the  con- 
nection of  St.  Louis  with  the  east  rather  than  the  south  is  already  so  thoroughly  pro- 
vided by  the  other  existing  trunk  lines  that  there  is  no  great  need  of  this  added 
route.  Railway  men  themselves  anticipate  no  more  economical  management  of  the 
Une  than  under  the  present  arrangement.  The  revenues  of  the  Chesapeake  &  Ohio 
might  in  effect  actually  suffer,  because  of  its  inability  to  command  an  interchange- 
with  western  roads  as  favorably  as  the  Southern  Railway.  Possibly  also  this  change- 
might  accentuate  the  movement  of  traffic  into  the  south  by  the  Virginia  gateways, 
a  roundabout  route,  rather  than  as  at  present,  directly  southeast.  The  interest  of  the 
Chesapeake  &  Ohio  is  naturally  in  the  long  haul,  that  is  to  say,  in  seaboard  traffic 
or  traffic  southward  by  the  Virginian  gateways.  Conceivably,  as  elsewhere  discussed 
in  connection  with  the  Carolina,  Clinchfield  &  Ohio,  some  traffic  might  be  moved 
by  the  short  cut  over  that  line.  But,  as  already  mentioned,  the  heavy  grades  on  the- 
line  between  Louisville  and  Ashland  would  discourage  this  movement  on  any  con- 
siderable scale.  Finally,  the  Southern  Railway,  east  of  St.  Louis,  and  the  Missouri 
Pacific,  west,  have  been  very  useful  at  times  in  relieving  congestion  at  St.  Louis 
when  under  blockade,  by  rerouting  and  making  up  solid  trains  each  for  the  other. 
These  trains  were  nm  on  their  own  power  between  the  two  respective  yards  without 
entry  at  all  upon  the  Terminal  Railroad  Association  rails,  except  to  cress  the 
Mississippi  River.  This  is  a  factor  of  moment,  although  possibly  such  diversion  of 
southbound  traffic  to  the  remaining  southern  systems  might  still  take  place  at  St. 
Louis.  But,  on  the  whole,  the  evidence  for  change  is  not  sufficiently  conclusive; 
and  no  recommendation  is  ventured  to  that  effect.  ,     > 

The  composition  of  the  important  Cincinnati-New  Orleans  line  within  the  South- 
em  Railway  system  (map  10)  is  of  peculiar  interest  as  illustrating  the  present  intri- 
cacy of  corporate  structure  in  the  southern  states.  It  also  bears  upon  the  problem-, 
oi  federal  incorporation.    At  the  same  time  it  distinctly  emphasizes  the  integral. 

63LC.C. 


relationship  within  a  system  between  the  thin  long-haul  lines  and  the  gathering- 
branches  and  feeders.    For  these  reasons  a  brief  review  of  the  structure  of  the  so- 
called  Queen  &  Crescent  route  is  pertinent.    This  is  so  succinctly  stated  by  Presi- 
dent Harrison  of  the  Southern  Railway  that  his  communication  is  incorporated  here- 
with: 

The  railroad  from  New  Orleans  to  Meridian  is  owned  by  the  New  Orleans  and  Northeastern  Railroad 
Company,  a  Louisiana  corporation.     The  voting  securities  of  that  Company  consLst  of  60,000  shares  of 
common  stock,  of  which  the  Southern  Railway  Company  owns  59,693  shares,  or  99.5  per  cent  of  the  total 
issue. 

The  railroad  from  Meridian  to  Chattanooga  is  owned  by  the  Alabama  Great  Southern  Railroad  Com- 
pany, an  Alabama  corporation.    The  voting  securities  of  that  company  consist  of  224,207  shares  of  stock, 
ordinary  and  preferred,  of  which  the  Southern  Railway  Company  owns  126,611  shares,  or  56.5  per  cent  of 
the  total  issue,  this  holding  being  pledged  by  Southern  Railway  Company  under  its  First  Consolidated 
Mortgage  securing  bonds  due  in  1994. 

The  railroad  from  Chattanooga  to  Cincinnati  is  owned  by  the  City  of  Cincinnati,  and  is  leased  for  a  term 
to  expire  in  1965,  to  the  Cincinnati,  New  Orleans  &  Texas  Pacific  Railway  Company,  an  Ohio  corpora- 
tion. The  voting  securities  of  that  company  consist  of  29,900  shares  of  common  stock,  of  which  20,493 
shares,  or  68.5  per  cent  of  the  total  issue  are  owned  by  Southwestern  Construction  Company,  a  New  Jersey 
corporation.  Southwestern  Construction  Company  is  merely  a  holding  company,  with  an  outstanding 
stock  issue  of  one  share  for  each  share  of  CNO&TP  stock  owned  by  it.  Of  the  20,493  outstanding  shares- 
of  Southwestern  Construction  Company,  12,986  shares,  or  63.4  per  cent  of  the  total  issue,  are  owned  by- 
Southern  Railway  Company  and  The  Alabama  Great  Southern  Railroad  Company,  the  former  owning' 
3,235  of  such  shares  and  the  latter  9,751  shares. 

For  thirty  years,  or  since  1890,  these  three  roads  have  been  parts  of  the  system  known  since  1S94  as  the 
Southern.    They  have  been  linked  up  under  the  trade  name  of  "Queen  &  Crescent"  to  form  a  through 
line  from  Cincinnati  to  New  Orleans  by  an  English  syndicate  headed  by  Baron  Erlanger.    This  syndicate,, 
failed  to  make  a  li\ing,  and,  in  1890,  sold  out  most  of  its  holdings  to  the  E.  T.  V.  &  G. 

In  their  present  relation  these  three  roads  are  necessary  to  the  complete  service  the  Southern  gives  to 
the  South  in  respect  to  traffic  moving  between  the  South  and  the  Ohio  River,  and  in  that  relation  also 
they  are  the  direct  and  only  effective  competitors  with  the  L.  &  N.  and  I.  C.    The  traffic  they  handle  has 
origin  or  destination  largely  upon  the  lines  of  the  Southern  proper,  east  of  the  Alleghanies  and  they  owe- 
their  recent  success  to  their  affiliation  with  the  Southern.    Financially,  they  have  shown  better  results 
than  the  Southern  proper  because  the  Southern  is  carrymg  the  burden  of  unprofitable  branch  lines  and 
terminals,  of  which  they  are  free.    As  these  branch  lines  and  terminals  develop  much  of  the  traffic  handled 
on  the  Cincinnati-New  Orleans  mainline,  the  companies  owning  that  mainline  get  the  benefit  of  whali. 
is  a  disability  to  the  Southern  proper.    So  true  is  this  that  if  the  Southern  traffic  should  be  withdrawn, 
e.  g.  from  the  C,  N.  O.  &  T.  P.,  that  line  would  again  dry  up  as  it  did  under  the  Erlangers  unless  some 
equally  fertilizing  relation  was  substituted.    No  other  such  relation  is  possible  upon  the  present  railroad 
map  if  competition  is  to  continue.    On  the  other  hand,  while  they  complement,  these  lines  do  not  compete 
with  any  of  the  lines  of  the  Southern  proper. 

The  C,  N.  O.  &  T.  P.  is  a  traffic  bridge  through  a  mountainous  country,  producing  little  tonnage  itself. 
It  has  been  largely  double  tracked  to  enable  it  to  handle  the  traffic  the  Southern  produces  and  deliversr 
to  it.  The  same  is  true  of  the  N.  O.  &  N.  E.,  which  depends  upon  the  independent  investment  of  the- 
Southern  of  $15,000,000  in  the  New  Orleans  Terminal.  This  statement  is  true  also,  but  in  less  degree,  ot 
the  A.  G.  S.,  which  produces  relatively  more  traffic  itself. 

It  is  probable  that  the  greatest  public  interest  in  respect  to  these  three  railroads  would  be  accomplished- 
by  a  financial  consolidation  of  them  with  the  Southern  proper— thus  to  butter  more  evenly  the  earnmgs 
and  the  burdens. 

The  possible  interest  of  the  Southern  Railway  in  the  Carolina,  Clinchfield  &  Ohio  i» 
discussed  in  connection  with  that  property  (page  550)  and  the  conclusion  is  reached 
that  it  properly  belongs  in  that  system  although  a  sufficient  general  interest  of  all 
the  roads  alike  has  been  therein  demonstrated  to  warrant  the  reservation  of  certain 
running  rights  over  the  Carolina,  Clinchfield  &  Ohio  as  a  joint  bridge  for  common  entry 
to  Carolina  territory.  The  dependence  of  the  Seaboard  Air  Line  Railway,  in  other 
words,  serving  this  territory,  is  so  considerable  that  no  exclusive  policy  by  the  South- 
em  or  any  other  single  railroad  appears  permissible. 

Certain  recent  changes  in  the  status  of  the  Southern  Railway  lines  in  southeastern. 
Georgia  call  for  slight  modification  of  the  railway  map.  The  main  line  of  the  Georgia. 
Southern  &  Florida  from  Macon  to  Jacksonville  (map  10)  has  been  so  improved  phys- 
ically that  the  policy  has  been  pursued  bv  the  Southern  Railway  ofgradually  diverting 

63  I.  C.  C. 


:  I 
1 


542 


INTERSTATE  COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


543 


\i     I 


■ftl' 


all  of  its  traffic  to  and  from  Jacksonville  to  this  line.  The  policy  also  is  pursued  of 
making  this  the  only  entrance  into  Jacksonville,  and  the  only  connection  with  the 
large  terminal  investment  in  the  St.  John's  River  Terminal  Company.  This  accession 
of  interest  in  the  Georgia  Southern  &  Florida  route  is  slowly  tending  toward  probable 
abandonment  of  the  existing  traffic  arrangement,  indicated  by  the  dotted  line  on  the 
map,  between  Savannah  and  Jacksonville.  The  northern  half  above  Jesup  has  already 
been  relinquished,  and  it  is  proposed  shortly  to  give  up  also  the  remaining  trackage, 
which  is  over  the  Atlantic  Coast  Line  rails  from  Jesup  into  Jacksonville. 

The  New  Orleans  Great  Northern  Railway  operates  an  independent  property, 
almost  300  miles  in  length,  extending  up  to  Jackson,  Miss.  By  trackage  it  is  admitted 
to  New  Orleans.  Seemingly  it  links  up  with  the  Alabama  &  Vicksburg,  which  cuts 
across  the  state  of  Mississippi  from  Meridian  west.  To  allocate  these  little  properties 
to  the  Illinois  Central  would  apparently  put  an  end  to  north-and-south  competition; 
and  in  the  Illinois  Central  system  there  would  be  no  connection  afforded  on  the  east. 
Similarly  there  is  no  physical  connection  with  the  Louisville  &  Xashville.  Thus  by 
a  proceas  of  elimination,  these  little  properties  seem  foreordained  for  inclusion  in  the 
Southern  Railway;  and  it  is  therefore  recommended  that  they  be  thus  merged. 

Tlie  Louisville  &  Nashville  and  Atlantic  Coast  Line  railways,  as  united  in  1902, 
under  the  conditions  already  set  forth,  constitute  a  second  system  throughout  the  south 
which  admirably  matches  the  Southern  Railway.  It  differs  from  the  Southern  prin- 
cipally through  its  ramifications  in  Kentucky  and  Tennessee  and  through  its  network 
of  lines  in  southern  Georgia  and  Florida.  It  also,  like  the  Southern  Railway,  is  well 
fitted  to  stand  largely  unchanged  under  this  plan  for  federal  consolidation.  At  one 
point,  however,  it  is  markedly  weak,  due  probablv  to  the  independent  evolution  of 
its  two  great  wings,  eastern  and  western.  This  defect  is  the  lack  of  connection  afford- 
ing through  routes  between  north  and  south  across  the  whole  of  middle  Georgia,  be- 
tween Atlanta  and  Waycross.  The  first  point  concerning  its  recreation  is  the  bridging 
of  this  gap. 

The  Atlanta,  Birmingham  &  Atlantic  Railway,  depicted  on  map  11,  is  the  largest 
single  property  in  the  southern  states  which  is  still  independent  of  tlie  creat  systems. 
Its  638  miles  of  line  were  completed  in  1910,  extending  from  Brunswick,  Ga.,  north- 
west to  Atlanta  and  Birmingham,  Ala.  The  physical  plant  has  never  been  utilized 
to  capacity,  and  it  has  always  suffered  from  the  fact  of  its  independence  and  lack  of 
interchange.  Its  history  is  highly  significant,  inasmuch  as  it  explains  why  so  consid- 
erable an  enterprise  was  projected  in  a  territory  already  so  abundantly  supplied  with 
railroads  in  every  direction.  'The  railroad  was  an  outgrowth  of  a  terminal  enterprise. 
Fine  properties,  well  located  strategically,  were  acquired  in  anticipation  of  the  entrj' 
of  the  Seaboard  and  Louisville  &  Nashville  into  Atlanta.  Subsequently,  after  the 
options  had  been  taken,  it  appeared  that  these  railroads  had  already  made  other  plantn. 
This  left  the  promoters  heavily  obligated  to  northern  investors  for  the  purchase  of 
admirable  terminals  for  which  there  was  no  railroad.  The  only  way  to  save  the  situa- 
tion, therefore,  was  to  construct  a  railroad  to  serve  the  terminal.  Such  was  the  begin- 
ning of  the  enterprise.  The  construction,  however,  once  determined  upon,  was 
carried  through  most  completely.  The  road  is  well  built,  modem  in  every  respect, 
with  excellent  terminals,  comparatively  heavy  rails  (80  pounds  for  the  most  part), 
and  with  modem  steel  bridges,  capable  of  carrying  heavy  loads.  It  is  difficult  to 
justify  the  enterprise  originally;  and  its  subsequent  bankruptcy  and  reorganization 
were  the  inevitable  consequences  of  the  construction  of  so  high-grade  a  line  through 
a  rather  thin  territory,  gridironed  in  every  direction  with  competing  lines.  A  source 
of  weakness  also  was  the  failure  to  extend  the  line  to  Jacksonville,  although  it  was 
expected  to  undertake  this  construction  from  "Waycross  south  just  before  the  war. 

63 1.  C.  C. 


Despite  its  history,  a  very  considerable  value  attaches  to  the  Atlanta,  Birming- 
ham &  Atlantic  Railway.  This  arises  from  its  relation  to  the  larger  systems  round 
about,  particularly  the  Atlantic  Coast  Line  and  the  Louisville  &  Nashville.  A 
-comparison  of  maps  10,  11,  and  12  evidences  an  apparent  division  of  the  territory 
of  Georgia,  Alabama,  and  Florida,  historically.  The  Southern  Railway  is  very 
inadequately  represented  in  southern  Georgia,  and  does  not  extend  south  of  Palatka. 
The  Central  of  Georgia  system  (map  12)  gridirons  th<e  field  south  of  Atlanta  with  a 
thin  line  of  communication  across  the  pine  barrens  to  Savannah.  Map  11  shows 
that  the  acti^dties  of  the  Atlantic  Coast  Line  are  restricted  mainly  to  Florida.  And 
both  this  railroad  and  the  Louisville  &  Nashville  have  refrained  from  any  attempt 
to  buUd  lines  through  middle  Georgia.  This  was,  historically,  the  result  of  an  agree- 
ment between  President  Spencer  of  the  Southern  Railway  and  the  owners  of  the 
Central  of  Georgia.' 

The  second  great  freeze  of  1896  pointed  to  a  great  future  for  citrus  and  vegetable 
culture  south  of  Jacksonville;  and  it  was  agreed  that  the  Atlantic  Coast  Line  should 
be  left  free  to  develop  that  territory  without  competition  from  the  Central  of  Georgia. 
But  whatever  plans  the  Southern  Railway  might  have  entertained  for  the  Central 
of  Georgia,  ultimately  were  brought  to  an  end  by  the  action  of  the  state  authorities; 
and  the  road  was  finally,  in  1909,  as  a  result  of  official  pressure  sold  to  the  Illinois 
Central  Railroad  as  a  noncompeting  system. 

In  the  meantime  while  these  events  were  transpiring,  the  Louisville  &  Nashville- 
Atlantic  Coast  Line  merger  having  occurred  in  1902,  the  combined  system  was  left 
with  a  considerable  gap,  as  shown  by  map  11,  across  middle  Georgia.  There  was  no 
north-and-south  line  between  Montgomery  on  the  west  and  Savannah  on  the  east; 
and  this  great  system  remains  to-day  dependent  upon  interchange  with  connecting 
lines  for  the  maintenance  of  direct  through  service  between  Jacksonville,  Atlanta, 
and  Cincinnati.  The  detour  to  the  west  by  Montgomery  is  all  right  for  St.  Louis 
and  Chicago,  but  not  for  movement  by  a  short  line  from  Jacksonville  to  Atlanta. 
It  is  the  location  of  the  Atlanta,  Birmingham  &  Atlantic  as  a  direct  line  and  bridge 
for  the  Louisville  &  Nashville- Atlantic  Coast  Line  system  across  this  gap,  which 
constitutes  the  principal  source  of  its  value,  viewed  in  a  large  way.  The  federal 
Railroad  Administration  recognized  this  fact.  All  of  the  fruits  and  vegetables  from 
nine  roads  in  Florida,  destined  for  western  points  through  the  Atlanta  gateway, 


1  The  following  letter  from  the  president  of  the  Louisville  &  Nashville  Railroad  forms  part  of  an  illumi- 
nating correspondence  reproduced  in  Senate  Interstate  Commerce  Committee  Hearings  on  Extension  of 
Tenure  of  Government  Control  of  Railroads,  1919,  pages  1364  et  seq:      • 

(Personal  and  Confidential) 

On  Pennsylvania  Railroad  train  No.  21 

February  22, 1896 
Samuel  Spencer,  Esq. 

President  Southern  Railway,  60  Broadway,  New  York  City. 
Dear  Sir: 
Pizarro.  How  shall  we  divide  the  new  world? 

Cortez.  I  will  take  North  America  and  you  can  have  all  of  South  America,  except ,  and  neither  of 

us  will  do  anything  to  the  Isthmus  without  notice  to  and  cooperation  of  the  other. 

Pizarro.  While  Patagonia  is  not  a  very  large  of  important  part  of  the  world,  yet,  perhaps,  it  is  as  much 

»s  I  can  tote.    *   *   * 

You  have  acquired  the  G.  S.  &  F.,  the  Atlanta  and  Florida,  and  the  Central  Railroad  has  been  reor- 
ganized in  accordance  with  your  plans  *  ♦  *;  The  L.  &  N.  will  not  compete  for  the  control  of  the  M. 
&  C.  Rd.  The  L.  &  N.  will  not  compete  for  the  control  of  the  B'ham,  Sheffield  &  Tenn.  River  Rd.,  pro- 
vided you  will  acquire  it,  should  it  become  necessary  to  do  so  to  prevent  its  extension  into  Birmingham, 
or  will  not  permit  it  to  get  into  a  position  where  it  may  become  a  disturber.  The  L.  &  N.  Rd.  will  not 
compete  for  the  control  of  the  Mobile  &  Birmingham  with  the  expectation  that  you  will  acquire  it.  It  is 
not  clear  what  disposition  ought  to  be  made  of  the  Georgia  &  Alabama  Railrpad  *  ♦  *. 
Yours  truly 

'■ —  President 

63  T.  C.  C. 


*  • 


544 


INTEBSTATE  COMMERCE  COMMISSION   KEPORTS. 


CONSOLIDATION   OF  RAILROADS. 


545 


'in 


m 


II 


were  routed  via  Waycroes  over  this  line.  The  Lo\iis\-ille  &  Nashville  has  at  times 
routed  its  "Dixie"  and  "Southland"  flyers  over  this  line,  shortening  the  haul  by 
about  42  miles  as  against  other  possible  routes.  All  the  evidence  points  to  a  natural 
relationship  between  the  Atlanta,  Birmingham  &  Atlantic  and  this  great  system. 
Probably  the  least  valuable  portion  to  the  Louisville  &  Nashville,  and  in  fact,  al- 
though heavily  constructed,  probably  the  least  needed  portion  of  this  road  in  gen- 
eral, is  the  stem  to  Birmingham.  But  there  is  certainly  a  through  route  thus 
made  available  from  Kansas  City  over  the  Frisco  line  into  Birmingham.  This  route 
is  dotted  on  map  11.  Not  even  construction  by  the  Louisville  &  Nashville  from 
West  Point  to  Albany,  to  bridge  the  gap,  would  afford  so  good  a  line  for  all  purposes, 
as  is  already  available  by  the  Atlanta,  Birmingham  &  Atlantic.  The  conclusion 
therefore  from  all  points  of  view  seems  well  founded  that  merger  of  the  Atlanta, 
Birmingham  &  Atlantic,  with  the  exception  of  the  branch  to  Thomasville  which  is 
serviceable  to  the  Seaboard  Air  Line  (page  547,  infra),  in  the  LouisA  ille  &  Nashville- 
Atlantic  Coast  Line  system  is  desirable  in  the  public  interest. 

As  to  the  terms  on  which  such  merger  should  take  place,  that  is  a  matter  which 
lies  beyond  the  scope  of  this  report;  but  it  would  appear  as  if,  in  view  of  the  demon- 
strable interrelation  of  the  several  properties,  an  equitable  basis  for  exchange^of 
securities  might  be  found.  If  thereafter  the  rich  traffic  of  the  Atlantic  Coast  Line 
in  Florida  were  thus  routed,  the  investment  would  appear  to  have  a  fair  basis  for 
support.  The  only  other  possible  way  of  bridging  this  gap  would  appear  to  be  by 
means  of  a  joint  use  with  the  Southern  Railway  (map  10)  of  the  line  of  the  Georgia 
Southern  &  Florida  from  Macon  to  Tifton,  together  with  trackage  on  the  Southern 
Railway  between  Atlanta  and  Macon.  But  even  this  seems  not  to  possess  the  ad- 
vantage of  directness  which  is  afforded  by  the  Atlanta,  Birmingham  &  Atlantic  line. 

Another  supplementation  of  the  Louisville  &  Nashville- Atlantic  Coast  Line  system, 
filling  in  the  empty  space  in  Georgia,  is  by  means  of  the  line,  depicted  on  map  11, 
of  the  Georgia  &  Florida  Railway.  This  little  road  from  Augusta  southwest  to  Madi- 
son, Fla.,  now  in  receivership,  is  one  of  the  smaller  properties  which  ought  to  be 
incorporated  in  the  stronger  systems.  Its  particular  value  is  in  connection  with  a 
through  route  between  Florida  and  Cincinnati  by  the  Carolina,  Clinchfield  &  Ohio 
gateway.  The  intervening  link  (map  11)  between  Augusta  and  Spartanburg  is 
afforded  by  the  Charleston  &  Western  Carolina  Railroad,  which  is  owned  entirely  by 
the  Atlantic  Coast  Line.  Traffic  by  this  route,  moving  north  over  the  Chesapeake 
&  Ohio,  as  fiuther  described  in  connection  with  the  Carolina,  Clinchfield  &  Ohio 
(page  551,  infra),  would  apparently  find  a  direct  routing  parallel  to  and  competitive 
with  the  other  Louisville  &  Nashville  northern  outlet  via  Knoxville;  and  also  with 
the  Queen  &  Crescent-Southern  Railway  route  between  Atlanta  and  Cincinnati  (map 
10).  Question  is  also  raised  as  to  the  proper  disposition  corporatively  of  the  Atlanta 
&  West  Point  Railway.  This  is  the  property  from  Atlanta  southwest  (shown  on 
mip  11)  to  West  Point  on  the  Georgia-Alabama  boundary.  The  further  continua- 
tion of  this  line  to  Montgomery  is  known  as  the  Western  Railway  of  Alabama.  A 
mixed  ownership  obtains  as  to  these  properties.  The  Atlanta  &  West  Point,  the 
Georgia  half,  is  controlled  by  the  Louisville  &  Nashville  and  the  Atlantic  Coast 
Line,  although  the  Central  of  Georgia  Railway  owns  1885  of  the  12,322  shares  of  capi- 
tal stock.  The  Western  of  Alabama,  the  Alabama  half,  is  owned  half  and  half  by 
the  Louis\dlle  &  Nashville  and  the  Central  of  Georgia.  But,  as  shown  by  map  12, 
the  Central  of  Georgia  operates  a  competitive  roundabout  line  between  Atlanta  and 
Montgomery  via  Columbus,  Ga.  This  investment  therefore  in  both  the  Western 
of  Alabama  and  the  Atlanta  &  West  Point  by  the  Central  of  Georgia  Railway  it 
appears  ought  properly  to  be  transferred  to  the  system  which  operates  the  line.  Pos- 
sibly it  is  the  one-third  interest  of  the  Atlanta  &  West  Point  in  the  Atlanta  Terminal 

63 1.  C.  C. 


Company  which  renders  this  crisscross  investment  desirable.  But  a  readjustment 
of  terminal  investment  ought  properly,  as  it  appears,  to  straighten  out  this  tangle, 
with  its  inevitable  division  of  responsibility. 

The  Norfolk  Southern  is  one  of  the  smaller  independent  railways  in  the  southeast 
which  must  be  incorporated  in  one  of  the  larger  systems,  if  the  general  consolidation 
plan  is  carried  through  to  a  logical  conclusion.  This  little  property,  as  map  11  shows 
Tims  through  the  middle  of  North  Carolina  with  its  base  on  Hampton  Roads.  But  it 
Tuns  principally  at  right  angles  to  the  stems  of  the  three  leading  systems  north  and 
south,  and  its  territory  is  sandy  and  sparsely  populated.  Only  at  Raleigh  and  Char- 
lotte does  it  really  touch  any  considerable  population  centers.  Where  shall  it  be 
placed?  It  can  contribute  no  strength.  Its  gross  operating  revenue  per  mile  of  line 
was  only  $5,648  in  1917.  Investment  account  to  be  sure  is  low — for  1917  being  only 
-$33,374  per  mile  of  line — almost  the  lowest  in  the  south.  The  net  operating  income 
yielded  only  3.7  per  cent  on  the  investment.  It  is  apparent  therefore  that  some  one 
of  the  larger  systems  should  assume  responsibility  for  this  property,  as  in  a  measure 
its  share  of  the  "white  man's  burden."  The  Seaboard  Air  Line  assm^edly,  although 
it  operates  in  this  neighborhood,  could  not  take  it  on.  Furthermore,  it  has  a  com- 
peting line  (map  13)  both  between  Raleigh  and  Charlotte  and  Norfolk.  The  Southern 
Railway  likewise  (map  10)  is  a  direct  competitor  along  the  whole  length  of  the  Norfolk 
Southern.  Thus,  by  a  process  of  elimination,  one  is  forced  to  the  conclusion  that  the 
Louisville  &  Nashville-Atlantic  Coast  Line,  must  assume  the  burden,  such  as  it  is. 
Possibly  some  day,  if  the  Louisville  &  Nashville  (map  11)  should  ever  build  to  a  con- 
nection with  the  Clinchfield  road,  as  subsequently  described,  all  that  would  be 
needed  would  be  trackage  the  rest  of  the  way  from  Charlotte  west  over  the  Seaboard 
to  a  junction  with  the  Clinchfield,  to  complete  a  new  tie  between  the  different  parts 
of  this  great  southeastern  system.  And,  of  course,  the  Atlantic  Coast  Line,  not  now 
either  in  Raleigh  or  Charlotte,  might  conceivably  profit  on  the  long  haul  which  the 
Norfolk  Southern  now  has  to  turn  over  to  connections.  At  all  events,  whether  profit- 
able or  not,  this  seems  to  be  about  the  only  disposition  which  can  be  made  of  this 
independent  property. 

The  divorce  of  the  Chicago,  Indianapolis  &  Louisville  Railway,  otherwise  known  as  the 
Monon,  from  the  present  joint  control  through  stock  ownership  by  the  Southern  Rail- 
way and  the  Louisville  &  Nashville,  is  elsewhere  discussed  in  connection  wiih  the 
trunk  line  group.  The  reasons  for  its  inclusibn  in  the  Baltimore  &  Ohio  system  are 
there  set  forth.  Briefly  to  review  them,  it  appears  that  there  is  no  longer  a  substantial 
traffic  interest  by  either  of  these  southeastern  systems  in  their  considerable  investment. 
The  disadvantage  of  extension  of  a  railway  beyond  its  natural  territory',  most  suitable 
for  intensive  development,  is  again  demonstrated.  The  Southern  Railway  prefers  to 
hold  itself  free  to  dispose  of  its  interchange  at  the  Ohio  River  gateways  freely  among 
all  trunk  line  connections  without  prejudice.  It  thus  avoids  entanglements  and 
jealousies  which  would  be  engendered  by  its  continued  participation  in  through 
carriage  to  Chicago.  And  as  for  the  Louis\dlle  &  Nashville,  the  Monon  from  Louis- 
ville has  never  been  of  any  value;  inasmuch  as  Evansville  is  its  natiu-al  Ohio  River 
•gateway,  and  much  of  its  Chicago  business,  especially  the  phenomenal  development 
of  coal  traffic  out  of  eastern  Kentucky,  moves  by  way  of  Cincinnati,  at  present  o>  er 
the  New  York  Central  lines.  Both  the  great  southeastern  systems  therefore  are 
Acquiescent  in  the  matter  of  this  relinquishment  of  their  joint  investment  in  the^ 
Monon  Railway. 

As  to  other  ndnor  additions  to  the  Louis\dlle  &  Nashville- Atlantic  Coast  Line  8>  s- 

tem,  there  is  only  one  further  suggestion.    This  has  to  do  with  the  Winston-Salem 

branch  of  the  Norfolk  &  Western.    In  pursuance  of  the  general  policy  to  adhere  as 

-strictly  as  may  be  to  the  established  boundary  of  southeastern  territory,  following  the 

main  line  of  the  Norfolk  &  Western  Railroad,  this  branch  should  be  transferred  to  a 

63 1.  C.  C. 


546 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION  OF  RAILROADS. 


547 


^'^■■■^l 


southern  system.'*  As  shown  on  map  11,  it  extends  from  Roanoke  southward  to  a 
connection  at  Winston-Salem  with  the  so-called  Winston-Salem  Southbound  Railroad. 
This  latter  road  is  at  present  jointly  owned  by  the  Atlantic  Coast  Line  and  the  Norfolk 
&  Western.  It  is  recommended  that  this  entire  line  up  to  Roanoke  be  merged  in  the 
Atlantic  Coast  line  system. 

Finally,  a  matter  of  general  interest,  corporatively,  concerns  the  entire  Louis\ille  & 
Nashville- Atlantic  Coast  Line  system.  This  is  the  tenuous  connection  by  which  the 
two  operating  halves  of  this  great  system  are  bound  together.  The  Atlantic  Coast 
Line  Railroad,  since  its  original  purchase  of  the  Louisville  &  Nashville  in  1902  ha» 
continued  its  control  by  the  ownership  of  a  bare  majority  of  the  capital  stock.  In  1919 
it  held  $36,720,000  of  the  outstanding  shares  of  the  Louisx-ille  &  Nashville  Railroad. 
This  situation  was  forced  upon  the  Atlantic  Coast  Line  in  1902  by  a  threat  of  the 
bankers  in  control  to  dispose  of  the  controlling  block  of  the  Louis\ille&  Nashville 
stock  to  the  Seaboard  Air  Line.  The  then  business  of  the  Plant  lines  in  Florida,  now 
incorporated  in  the  Atlantic  Coast  Line  Railway,  was  di\-ided  about  half  and  half 
each  side  of  the  mountains  to  the  north.  The  Loui8^ille  &  Nashville  in  the  hands  of 
the  Seaboard,  a  competitor,  might  close  the  western  outlet  to  the  Atlantic  Coast  Line. 
The  only  alternative  was  to  take  the  stock  and  pay  the  price.  The  investment  has 
turned  out  to  be  a  fortunate  one;  but  that  does  not  warrant  indefinitely  a  continuance 
of  this  tenuous  connection.  The  temptation  can  not  be  resisted  to  recommend  there- 
fore, in  so  far  as  it  falls  within  the  scope  of  this  consolidation  plan,  that  a  complete 
merger  by  exchange  of  securities  shall  supplant  the  existing  arrangement. 

The  continued  independence  of  the  existing  Seaboard  Air  Line  Railway  merits 
attentive  consideration.  Its  financial  condition  does  not  permit  it  to  support  further 
additions  which  are  not  at  least  of  equal  contributing  strength.  Map  13  shows  that 
at  present  the  road  is  unduly  spread  out  and  that  its  various  arms  westward  are  en- 
tirely disconnected.  These  arms,  on  the  other  hand,  extend  somewhat  entreatingly 
toward  a  connection  with  some  western  system,  notably  the  Illinois  Central.  And  a 
combination  of  the  two  properties,  as  already  worked  out  in  the  Oldham  plan,  gives  a 
general  comprehensiveness  to  the  combined  group,  quite  analogous  to  the  reach  and 
scope  of  the  other  two  great  systems.  There  are  substantial  reasons  commending 
such  a  merger.  Especially  would  advantage  follow  in  view  of  the  possible  inclusion 
of  the  Frisco  line  from  Memphis  to  Binhingham  in  the  Illinois  Central.  There  would 
thus  be  set  up,  over  the  lines  subsequently  recommended  in  this  plan  for  inclusion 
in  the  Seaboard,  an  in\'iting  route  between  Florida  and  the  west.  Yet,  assuredly^ 
such  a  merger  of  the  Seaboard  and  the  Illinois  Central  would  be  a  radical  and  forced 
alliance.  The  Central  of  Georgia  being  already  controlled  by  the  Illinois  Central,  the 
effect  of  adding  the  Seaboard  would  be  to  abolish  competition  entirely  at  Americus^ 
Ga.,  Huntsville,  Ala.,  and  a  number  of  other  smaller  places.  The  Seaboard  and  the 
Central  of  Georgia  are  to-day  strong  competitors  at  Savannah,  at  Albany,  Columbus, 
Athens,  and  Atlanta  in  Georgia,  and  at  Montgomery  and  Birmingham,  Ala.  The 
merger  would  abolish  competition,  and  it  would  not  follow  established  routes  of  com- 
merce. For  the  Atlantic  Coast  Line  is  to-day  the  preferred  connection  with  the 
Central  of  Georgia  on  traflBc  from  the  west;  and  the  Atlantic  Coast  Line  and  the  South- 
em  Railway  are  preferred  connections  on  eastern  traffic.  The  Seaboard  Air  Line  is 
not  at  present  a  preferred  connection  of  either  the  Illinois  Central  or  the  Central  of 
Georgia  Railway.  Nor  would  such  a  merger  contribute  to  the  distribution  of  coal, 
since  both  the  Illinois  Central  in  Alabama  and  Tennessee  and  the  entire  Seaboard 
system  are  lacking  in  coal  development.  For  these  and  other  reasons  the  alternative 
is  elected  of  retaining  the  independence  of  the  Seaboard  Air  Line  as  a  fourth  system 
in  the  southeast.    This  recommendation  is  made  with  some  misgivings;  but  it  is 

sCf.  the  policy  laid  down  in  the  Bhufield  Shippers  A$90.  t.  N.  dt  W.  Ry.  Co.,  22 1.  C.  C,  519. 

63  I.  C.  C. 


apparently  compelled  as  a  compromise  with  the  situation.  *Such  being  the  case,  the 
Seaboard  system  must  be  strengthened  wherever  that  is  possible  without  committing, 
lines  essential  to  the  general  situation  to  its  slightly  precarious  charge. 

And  yet  there  are  certain  elements  of  stren^h  in  the  Seaboard  Air  Line  which,  if 
it  can  be  built  up  sufllciently  to  enable  it  to  survive  in  competition,  may  render  it 
ultimately  an  important  factor  in  the  development  of  the  southeast.  It  has  a  highly 
diversified  traffic.  It  enjoys  a  long  haul  on  rapidly  growing  business  in  Florida. 
And  the  abstention  of  the  Southern  Railway  from  Florida  development  leaves  the 
Seaboard  with  only  one  competitor,  the  Atlantic  Coast  Line,  for  this  lucrative  and 
rapidly  growing  business.  Given  a  coal  supply  from  the  north  by  participation  in 
the  affairs  of  the  Clinchfield  property,  and  the  Seaboard  may  well  establish  itself 
finally  as  a  great  railroad.  But  if  its  strength  be  dissipated  in  overextension  without 
sufficient  originating  lines,  this  future  may  be  conceivably  be  jeopardized .  Such  recom- 
mendations for  addition,  therefore,  as  ar?  herein  made  are  essentially  conservative. 

The  Georgia  Southern  &  Florida  Rg-ilway  operates  about  400  miles  of  line  in  south- 
ern Georgia  and  northern  Florida.  It  extends  from  Macon  on  the  north  to  Jacksonville 
and  Palatka,  as  shown  on  map  10  by  the  dotted  line.  It  was  constructed  in  the 
nineties,  largely  with  reference  to  orange  culture,  but  the  second  great  freeze  drove 
this  business  farther  south,  and  as  a  local  proposition  the  line  seems  somewhat  to 
have  languished.  It  is  controlled  at  present  by  the  Southern  Railway  through  a 
majority  stock  ownership,  together  with  $2,000,000  of  bonds.  It  would  accord  appar- 
ently with  the  announced  policy  of  the  Southern  to  abstain  from  local  development 
in  Florida  to  withdraw  from  a  part  of  this  investment.  The  Southern  Railway,  as 
elsewhere  described,  is  most  profitably  utilizing  the  main  line  of  this  railroad.  But 
the  southern  branch  from  Valdosta,  Ga.,  to  Palatka  (map  10)  quite  appropriately  fits 
into  the  Florida  network  of  lines  in  the  Seaboard  system.  Negotiations  were  opened 
some  years  ago  for  this  transfer,  but  the  Seaboard  at  that  time  was  unable  to  arrange 
the  financing.  A  considerable  flow  of  through  traffic  has  been  recently  forwarded  by 
the  Seaboard  over  this  line,  thus  indicating  that  it  is  a  natural  part  of  its  system. 
The  Seaboard  has  manifested  a  further  interest  in  the  entire  Georgia  Southern  & 
Florida  Railway  (dotted  on  map  13).  This  would  carry  them  up  to  Macon  and  inci- 
dentally would  tie  together  the  two  dissociated  western  arms  of  the  Seaboard  system. 
Taken  in  connection  with  the  Atlanta,  Birmingham  &  Atlantic  (also  dotted  on  map 
13),  a  through  line  up  to  Birmingham  might  be  provided.  Were  the  Seaboard  finan- 
cially strong  enough  also  to  take  on  the  Memphis-Birmingham  Frisco  division,  almost 
an  air  line  from  (Kansas  City)  Memphis  to  Florida  could  be  set  up.  But,  as  elsewhere 
stated  in  connection  with  the  Illinois  Central  and  the  Frisco,  it  is  doubtful  even 
whether  as  strong  a  system  as  the  Illinois  Central  should  be  permitted  to  break  up 
the  long-standing  interest  of  the  Frisco  in  this  route.  The  Seaboard  may  still  enjoy 
the  interchange  of  traffic  with  this  route,  but  it  seems  inexpedient  to  risk  overexten- 
sion until  its  finances  have  become  more  substantially  consolidated,  as  it  is  hoped 
with  the  present  rate  of  growth  they  may  in  time  become. 

It  is  furthermore  recommended  that  the  Durham  branch  of  the  Norlolk  &  Western 
Railway  (shown  on  map  13),  extending  from  Lynchburg  south,  be  merged  in  the 
Seaboard  Air  Line  system.  This  is  analogous  to  the  disposition  of  the  other  Winston- 
Salem  branch  (page  545,  supra).  At  Durham  it  connects  with  the  Seaboard,  the 
Norfolk  Southern,  and  the  Durham  &  Southern.  This  last  (shown  on  map  13)  is  one 
of  the  so-called  Duke  lines,  and  interchanges  almost  exclusively  with  the  Seaboard, 
The  transfer  of  the  Durham  branch  from  the  Norfolk  &  Western  would  conform  to  the 
general  plan  of  strict  delimitation  of  southern  rate  territory,  and  it  would  also  effect 
a  material  saving  of tmileage  on  all  traffic  coming  from  the  west  either  by  the  Norfolk 
&  Western  or  the  Chesapeake  &  Ohio  Railway.  The  net  result  as  to  the  Virginia 
gateways  would  be  to  give  access  for  the  Southern  Railway  to  all  of  them  except 

63 1.  C.  C. 


^L 


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CONSOLIDATION   OF   RAILROADS. 


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W 


Roanoke  and.  Petersburg;  to  give  the  Atlantic  Coast  Lino  access  to  every  Virginia 
.gateway  except  Lynchburg,  and  to  let  the  Seaboard  into  all  of  them  except  Roanoke. 
Coincidently  all  these  southern  systems  would  be  afforded  satisfactory  interchange 
points  with  all  three  of  the  principal  Chesapeake  routes  to  the  west.  The  Atlantic- 
Coast  liine  perhaps  would  be  slightly  favored  because  the  Roanoke  gateway  would 
afford  a  through  route  to  the  east  by  way  of  the  Norfolk  &  Western  to  Hagerstown. 
But  this  advantage  is  a  necessary  feature  of  the  situation. 

The  Seaboard  Air  Line  would  also  profit  from  a  connection  by  trackage  or  otherwise 
between  Spartanburg  and  Columbia,  S.  C.  Without  this  link,  as  map  13  shows,  the 
southern  half  of  the  property  would  not  be  in  position  to  benefit  by  any  connection 
with  the  Clinchfield  enterprise,  soon  to  be  discussed.  This  link  would,  however, 
assist  substantially  in  the  development  of  coal  business  toward  the  south  and  of  long- 
haul  business  from  Florida;  possibly  some  day  to  Cincinnati,  as  elsewhere  described. 

The  Illinois  Central  occupies  a  unique  position  among  the  carriers  of  the  country. 
Traversing  one  of  the  most  fertile  regions  on  the  earth,  confronted  by  no  physical 
obstacles  of  grade  or  alignment,  and  rigidly  confining  its  activities  to  the  cultivation 
of  Its  native  territory,  it  has  prospered  accordingly.    In  the  rare  instances  where  it 
has  acquired  control  of  other  lines,  the  choice  has  been  so  well  exercised  as  to  con- 
tribute strength  to  the  parent  company.    The  net  operating  income  in  percentage  of 
the  investment  in  road  and  equipment  for  the  typical  year  1917  clearly  reflects  its 
T^elative  prosperity  and  the  general  strength  of  all  of  its  parts.    For  the  Illinois  Central 
Raihx)ad  this  return  for  1917  was  5.17  per  cent.    For  the  Central  of  Georgia  Railway 
it  was  4.62  per  cent,  and  for  the  Yazoo  &  Mississippi  Valley  it  was  6.05  per  cent.    It 
is  evident  that  one  has  to  do  here  with  a  system  which  is  industriously  pursuing  its 
-own  best  ends  and  contributing  thereby  to  the  upbuilding  of  the  country.    It  is 
competent  to  stand  alone  and  has  an  average  return  which  approximates  closely  the 
average  return  of  5  per  cent  which  it  is  the  endeavor  of  this  consolidation  plan  to  make 
general  for  all  of  the  great  systems.    Neither  from  an  operating,  traffic,  or  financial 
standpoint  does  there  appear  to  be  a  nacessity  for  disturbance  of  the  existing  situation. 
Such  modification  as  is  suggested  is  merely  in  detail.    The  only  broad  question,  which 
has  already  been  decided  in  the  negative,  is  as  to  whether  the  superflous  strength  of 
this  existing  system  should  be  used  through  merger  to  average  up  the  Seaboard  Air 
Line  status. 

The  Illinois  Central  system  at  present,  a-?  shown  by  map  12,  is  something  of  a  hybrid. 
It  is  a  north-and-south  trunk  line;  but  between  Chicago  and  Omaha  it  is  also  an  east- 
and-west  stem.  It  operates  in  the  southeast,  in  trunk  line  territory,  and  in  the  western 
field.  Obviously  it  can  not  be  cut  in  halves  at  the  Ohio  River  in  order  to  conform 
to  the  policy  adopted  for  the  other  southeastern  roads.  It  must  remain  as  a  trunk 
line  to  the  Gulf.  Serious  question  is  raised,  however,  as  to  its  continuance  under  a 
consolidation  plan,  as  practically  a  stem  line  in  the  western  territory  between  Chicago 
and  the  Missouri  River.  It  is  urgently  represented  that  this  western  stem  should 
l(^cally  be  amputated  and  merged  in  one  of  the  other  western  transcontinental 
systems.  The  practical  elimination  of  Omaha  as  an  open  trading  center  for  traffic 
interchange  tends  to  confirm  this  proposal.  The  already  predominant  interest  of  the 
Union  Pacific  Railroad  in  this  property  commends  the  suggestion  that  a  transfer  of 
this  entire  western  division  to  the  Union  Pacific  would  scarcel\-  disturb  the  existing 
relationships.  1 1  will  be  recalled  that  the  Union  Pacific  control  was  originally  acquired 
by  Mr.  Hirrimin  with  the  expectation  that  it  would  afford  him  an  independent 
entry  into  Chicago  for  his  great  transcontinental  system.  To  be  sure,  it  was  never 
utilized  exclusively  for  that  purpose,  because  of  the  complications  which  developed 
at  the  proposal  to  change  the  rdle  of  the  Union  Pacific  east  of  Council  Bluffs  to  a 
competitor  rather  than  a  connection  with  its  neighbors  on  the  east.    During  1917, 

63 1.  G.  C. 


the  Union  Pacific  delivered  13,375  carloads  of  freight  at  Council  Bluffs  to  the  Illinois 
Central,  and  received  from  it  5,692  cars.  Comparison  with  other  roads,  as  afforded  by 
the  general  table  on  page  573  indicates  that  the  traffic  interchanged  with  this  road 
was  surpassed  only  by  the  North  Western  and  the  St.  Paul.  Obviously  this  western 
•division  is  of  very  great  importance.  There  is  a  heavy-  movement  of  lumber,  coal, 
and  grain.  So  important  a  channel  of  commerce  is  it,  that  the  burden  of  proof  assuredly 
rests  upon  the  proposal  to  change. 

Among  the  objections  to  dismemberment  of  the  Illinois  Central  the  historical  con 
■aderations  are  of  weight.    The  line  into  Sioux  Falls  was  the  first  railroad  west  of 
Chicago  to  reach  the  Missouri  River.    During  all  the  years  since  intervening,  the 
Illinois  Central  has  built  itself  into  the  traffic  conditions  in  this  region,  and  it  is  a 
serious  matter  to  uproot  the  established  relationships.    Another  historical  considera- 
tion is  disclosed  by  map  12.    The  main  line  traversing  Illinois  is  not,  as  commonly 
supposed,  the  road  into  Chicago.    That  was  subsequently  built  and  was  always  known 
as  the  Chicago  "branch."    The  "main  line"  authorized  in  the  original  charter  ran 
from  Clentralia,  111.,  due  north  through  Freeport  up  to  Madison,  Wis.    This  "main 
line"  is  largely  dependent  for  its  through  traffic  upon  tonnage  received  over  the 
western  division.    For  naturally  none  of  the  western  lines  into  Chicago  would  consent 
ito  short-haul  themselves  on  traffic  destined  to  the  Gulf.    This  "main  line,"  to  be 
jsure,  would  still  be  largely  utilized  for  coal  destined  to  the  northwest.    But  it  would 
be  substantially  dried  up  by  amputation  of  the  western  arm.    Furthermore,  if  thus 
transferred,  the  inclusion  of  this  line  to  Council  Bluffs  would  practically  duplicate 
the  facilities  already  possessed  by  the  different  systems,  as  enlarged  under  this  plan. 
Uniting  the  Chicago  &  North  Western  with  the  Union  Pacific  disposes  of  any  further 
need  of  another  line  between  Chicago  and  Council  Bluffs  (map  15).    Even  worse 
duplication  would  arise  from  incorporation  of  this  line  in  the  Burlington  system 
(map  16);  particularly  as  this  division  of  the  Illinois  Central  almost  completely 
parallels  the  Chicago  Great  Western.    It  is  true  that  the  addition  would  let  the  Bur- 
lington into  eastern  South  Dakota,  and  possibly  some  more  detailed  segregation  of 
this  western  Illinois  Central  division  might  be  worked  out,  assigning  different  parts 
AS  has  already  been  done  in  various  cases.    But  by  and  large  it  is  recommended  that 
no  change  take  place  in  so  far  as  the  stem  from  Chicago  to  Council  Bluffs  is  concerned. 
The  Memphis-Birmingham  division  of  the  St.  Louis-San  Francieco  Railway  is  one 
of  the  great  arteries  of  commerce  in  the  south.    The  old  Kansas  City,  Fort  Scott  & 
Memphis  line,  by  these  rails,  handled  a  very  lucrative  business  in  the  supply  of 
foodstuffs  to  the  southern  states  and  the  return  carriage  of  coal  and  steel  products  to 
the  western  country.    It  is  a  serious  matter  to  recommend  any  interference  with  a 
property  which  has  so  thoroughly  established  itself  in  the  trade  currents  of  any  region. 
Yet  this  extension  of  a  western  road,  east  of  the  Mississippi,  into  the  heart  of  the 
southeast,  xaolates  the  general  principle  already  laid  down,  of  drawing  rather  strictly 
the  boundaries  of  consolidation  territory.    Whatever  disposition  is  made,  however, 
must  fully  protect  the  route  and  assure  its  continued  upkeep  and  development. 
The  Birmingham  division  of  the  Frisco  could  be  utilized,  as  eleewhere  eet  forth,  in 
several  ways.    The  Seaboard  system  evidently  covets  it,  to  complete  a  through  line 
to  Jacksonville,  but  this  claim  has  been  rejected  largely  on  financial  grounds  (page 
546 ).    The  other  disposition  of  it,  and  one  which  is  recommended  by  the  best  authority 
among  unprejudiced  railway  executives,  is  that  it  be  assigned  to  the  Illinois  Central 
system.    Consideration  of  map  12  demonstrates  that  for  three  reagons  it  should  be  thUg 
placed.    The  Illinois  Central  is  already  dependent  upon  this  Frieco  line,  as  shown  by 
map  12,  from  Jasper  into  Birmingham.    Also,  the  inclusion  of  this  division  would 
take  care  of  the  Illinois  Central  stub  at  Aberdeen  Junction.    The  Illinois  Central, 
moreover,  has  the  financial  strength  to  support  and  develop  the  line.    There  is  one 
objectionj  however,  which,  were  the  Seaboard  system  financially  stronger,  mi^ht 

63  i:  Ci  C.  ' 

63763—21 7 


It 

I 

I 


550 


INTEBSTATE  COMMERCE  COMMISSION  REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


551 


I 


;i 


turn  the  scales.  The  Illinois  Central  has,  in  fact,  another  competitive  route  over  is 
own  lines  up  to  St.  Louis.  And  it  would  preserve  competition  more  fully  were  these 
two  competitive  routes  between  the  packing-house  centres  and  the  south  to  be  kept 
independent  of  one  another.  But  conformably  to  the  best  expert  opinion,  it  seems 
that  the  Illinois  Central  on  the  whole  could  take  better  care  of  the  line  than  anyone 
else,  were  it  to  be  transferred. 

As  against  the  foregoing  proposal,  it  should  be  borne  in  mind  that  high-grade  fast 
through  service  from  Kansas  City  to  Birmingham  and  the  southeast  generally  passes 
in  large  volume  over  this  line.  The  return  movement  of  company  fuel  for  the  Frisco 
system,  and  of  a  large  volume  of  the  products  of  the  Birmingham  district  rolling  mills — 
rails,  angles,  bars,  bolts,  spikes,  and  all  other  products  manufactured  from  iron — ^is 
very  heavy.  The  division  is  one  of  the  best  revenue-producing  units,  both  gross  and  net, 
in  the  Frisco  system.  It  is  \irged  that  the  Illinois  Central  already  has  a  good  line  from 
the  north  into  Birmingham  through  Martin,  Tenn.,  and  really  does  not  need  the  other 
inlet.  The  important  point  to  consider  is  the  effect  upon  the  through  movement  of 
traffic,  of  breaking  up  this  route.  Of  course  it  would  have  to  break  somewhere  between 
Jacksonville  or  Savannah  and  Kansas  City,  in  any  event.  But  if  the  greater  volume 
of  it  stops  or  originates  in  the  Birmingham  district,  there  would  seem  to  be  good 
ground  for  the  contention  that  the  through  route  from  Kansas  City  to  Birmingham 
should  remain  intact  in  the  hands  of  a  single  management. 

The  Illinois  Centtal  has  so  far  built  the  Yazoo  &  Mississippi  Valley  road  (map  13) 
into  its  system  that  to  recommend  any  transfer  would  be  manifestly  prejudicial  to 
the  parent  system.  A  competing  line  might  be  set  up,  by  transfer  of  this  property 
to  one  of  the  Gulf  systems  across  the  river,  for  example,  the  St.  Louis-San  Francieco; 
and  this  proposal  has  been  made  as  a  possible  plan.  But,  on  the  other  hand,  the 
Yazoo  road;  with  its  many  branches  and  feeders,  must  be  treated  as  an  originating 
property,  fitted  for  attachment  to  a  strong  through  line:  and  the  established  relation- 
ship is  therefore  recommended  for  continuance.  The  only  other  addition  to  the 
Illinois  Central  system  is  the  Tennessee  Central,  affording  entrance  into  Nashville 
map  13):  and  the  Gulf  &  Ship  Island,  which  more  naturally  attaches  to  this  system 
than  to  any  other. 

The  Carolina,  Clinchfield  &  Ohio  Railroad,  although  operating  only  291  miles  of 
line,  is  so  situated  strategically  in  its  relation  to  the  southeastern  territory,  and  par- 
ticularly to  the  coal  supply,  that  its  disposition  under  a  national  consolidation  plan 
merits  most  careful  consideration.  It  is  at  once  a  bridge  line  and  also  an  almost 
indispensable  fuel  line  for  the  south.  As  a  bridge  it  traverses  the  rugged  mountain 
region  which  divides  the  Ohio  Valley  above  Cincinnati  from  the  southeastern  piedmont 
and  seacoast  belt  of  the  Carolinas  and  Georgia.  The  northeast-southwest  trend  of  the 
Allegheny  range  affords  a  nimiber  of  gaps  or  openings  for  the  lines  which  follow  the 
general  direction  of  the  mountain  ridges.  The  situation  is  beet  depicted  on  map  10. 
The  Norfolk  &  Western,  for  example,  finds  its  way  naturally  in  souUi western  Virginia 
through  the  gap  at  Roanoke  down  to  a  connection  with  the  Southern  Railway  at  Bris- 
tol, then  on  to  Knoxville,  Chattanooga,  and  New  Orleans.  But  an  impenetrable  wall 
or  ridge  extends  along  almost  the  entire  western  boundary  of  Vii^nia,  broken  only 
by  the  Chespeake  &  Ohio  passage  at  Covington,  and  the  Norfolk  &  Western  which,  as 
above  described,  slips  through  the  gap  west  of  Roanoke.  South  of  Roanoke  the 
impassable  barrier,  lying  south  of  the  Norfolk  &  Western  line  as  far  as  Bristol,  again 
effectively  shuts  off  all  connection  between  north  and  south  at  right  angles  to  the  trend 
of  the  ridge.  And  toward  the  southwest  again,  north  of  Asheville,  the  long  stretch  of 
the  Unaka  Mountains  extends  down  into  northern  Georgia.  This  Allegheny  barrier, 
running  the  whole  length  of  the  western  boundary  of  North  Carolina  (map  10  again), 
is  penetrated  into  Tennessee  by  only  two  lines.    One  is  the  Southern  Railway  line 

63 1.  C.  C. 


by  Paint  Rock,  above  Asheville.  This  is  an  important  link  in  the  great  Southern 
Railway  system.  The  Carolina,  Clinchfield  &  Ohio  is  the  other  bridge  line.  Its 
location  is  shown  on  maps  10, 11,  and  13  in  relation  to  the  other  carriers.  It  is  not  only 
independent,  but  it  cuts  clear  through  both  the  Carolina-Tennessee  ridge,  known  as 
the  Iron  Mountains  and  then  goes  on  up  to  the  northwest  and  penetrates  again  the 
parallel  barrier  between  Virginia  and  Kentucky.  In  other  woi-ds,  it  cuts  clear  thi ough 
all  the  intervening  ridges,  occup>ing  perhaps  the  only  available  location  for  a  direct 
through  line  between  the  uppar  Ohio  Valley  and  the  Carolinas.  Not  only  does  it 
entirely  penetrate  this  otherwise  almost  impassable  country,  but  it  does  so  with  a 
high  standard  of  construction  and  easy  grades  which  fit  it  for  the  carriage  of  an  immense 
tonnage.  Consequently,  the  line,  because  of  its  strategic  location,  is  essential  in  many 
ways  to  the  successful  operation  of  a  number  of  adjoining  systems. 

The  second  dominant  feature  of  the  Clinchfield  property  is  its  relation  to  the  coal 
supply  of  the  southern  states.    The  coal  measures  of  the  territory  of  eastern  Kentucky 
western  Virginia,  and  northeastern  Tennessee  constitute  the  supply  primarily  for  the 
entire  southeastern  territory.    This  is  true  not  only  of  the  company  fuel  needed  for 
railroad  purposes,  but  also  for  the  fuel  supply  of  the  great  industrial  development  in 
recent  years  of  the  Carolinas  and  Georgia.    The  Birmingham  district  lies  so  much 
farther  west  that  it  need  not  be  considered  except  as  competitive  in  parts  of  Georgia. 
The  Central  of  Georgia  R^lroad  is  said  to  have  only  one  coal  operation  on  its  lines. 
The  Illinois  Central  has  none  in  either  Alabama  or  Tennessee.    There  are  no  coal 
measures  whatsoever  in  the  territory  of  the  Seaboard  Air  Line,  except  through  its 
entrance  at  long  range  into  Birmingham.    But  the  recent  participation  of  the  Louis- 
ville &  Nashville  and  of  the  Southern  Railway  in  the  development  of  these  Kentucky 
Virginia,  and  Tennessee  coal  fields  is  of  the  utmost  importance.    The  interest  of  the 
Louisville  &  Nashville  in  this  region  has  to  do  largely  with  shipments  toward  the 
northwest.    The  location  of  these  lines,  shown  on  map  11,  which  tap  the  so-called 
Harlan  and  Hazard  fields  in  southeastern  Kentucky,  demonstrates  that  their  service- 
ableness  lies  in  the  direction  of  carriage  away  from  rather  than  into  the  south.     Cer- 
tainly the  Louisville  &  Nashville  is  dependent  upon  a  very  roundabout  route  via 
Atlanta  to  a  contact  with  the  Atlantic  Coast  Line  at  Augusta.    The  demand,  in  fact 
for  the  Louisville  &  Nashville  coal  from  the  direction  of  the  Ohio  Valley  has  increased 
80  phenomenally  as  to  tax  the  facilities  of  that  railroad  to  the  utmost.    On  the  other 
hand,  the  interest  of  the  Southern  Railway  in  the  development  of  the  coal  fields 
necessary  to  supply  the  phenomenal  growth  of  manufactures  throughout  the  piedmont 
belt  is  manifested  on  map  10  by  the  lines  which  extend  to  the  boundary  between 
Virginia  and  Kentucky  and  which  penetrate  Kentucky  just  west  of  the  extreme 
western  tip  of  Virginia.    But  this  company,  unlike  the  Louisville  &  Nashville,  is 
primarily  concerned  in  the  carriage  of  this  coal  to  the  southern  states,  the  gateway  being 
by  way  of  Paint  Rock,  just  north  of  Asheville.    As  the  map  discloses,  the  Paint  Rock 
gateway  also  affords  the  only  connection  over  its  own  rails  between  the  eastern  and 
western  wings  of  the  Southern  Railway  system,  north  of  Atlanta.    There  is  only  one 
other  railroad  operating  in  this  region.    This  is  the  Seaboard  Air  Line.    Having  no 
coal  development  whatsoever  on  its  own  lines,  it  in  turn  is  rendered  entirely  depend- 
ent upon  its  neighbors  for  its  own  fuel  supply  as  well  as  the  need  of  its  industries. 

The  foregoing  general  description  may  now  serve  to  elucidate  the  important  rdle 
assumed  by  the  recently  constructed  Carolina,  Clinchfield  &  Ohio.  Both  as  a  bridge, 
affording  connection  to  the  railways  north  and  south  of  the  barrier,  and  also  in  its 
relation  to  the  coal  supply  of  many  of  its  neighbors,  it  is  almost  indispensable.  Its 
interest  to  the  Southern  Railway,  shown  on  map  10,  lies  in  the  fact  that  it  affords  a 
much  more  direct  carriage  from  much  of  the  coal  territory  opened  up  by  this  railroad 
than  is  possible  by  the  roundabout  shipment  southbound  via  Paint  Rock  and  Asheville 
03  I.  C.  C. 


It 


552 


INTERSTATE   (*0M MERCK   (^MMISSIOX    REPORTS. 


into  the  Carolinas.  And,  in  the  opposite  direction,  northbound,  the  Southern  might 
conceivably  find  it  very  advantageous  to  have  another  through  route  opened  up  from 
the  ('arolinas  into  the  Ohio  Valley  other  than  away  around  through  Knoxville  and  Har- 
riraan  Junction  up  to  Cincinnati.  The  Clinchfield  might  thus  serve  more  effectively 
to  bind  the  widely  separated  halves  of  the  Southern  system  together.  The  Clinch- 
field  moreover  is  the  short  route  between  the  Carolinas,  and  north  of  the  Ohio  River 
fast  of  a  line  from  Portsmouth,  Ohio,  through  Columbus  to  Detroit;  whereas  Paint 
Rock,  for  miscellaneous  traffic,  is  the  short  line  to  points  vest  of  the  zone  thus  defined. 
But  this  miscellaneous  traffic  is  a  negligible  part  of  the  whole,  so  that  incorporation  of 
the  Clinchfield  in  the  Southern  system  would  by  no  means  put  an  end  to  competition, 
fts  called  for  under  the  transportation  act. 

As  for  relationship  to  the  Louisville  &  Nashville  Railroad,  the  Clinchfield  does  not 
yet  touch  this  property;  but,  according  to  map  11,  its  eastern  Kentucky  lines  and  also 
one  in  Virginia  come  close  to  a  contact  with  the  Clinchfield.  This,  if  made,  might  pos- 
sibly afford  a  valuable  outlet  for  Louisville  &  Nashville  coal  or  traflSc  into  the  Caro- 
linas. And  such  a  connection  has  been  already  projected  by  means  of  a  tunnel 
through  the  divide.  This  is  bound  to  come  in  due  season.  But  until  that  time  the 
interest  of  the  Louisville  &  Nashville  may  be  regarded  ae  relatively  remote,  although 
certainly  prospective.  If  once  effected,  consideration  of  map  11  shows  that  a  new 
bond  would  also  be  afforded  between  the  two  gr^at  halves  of  the  LouisWUe  &  Nash- 
ville-Atlantic Coast  line  system.  At  present  they  meet  only  at  Augusta.  Were 
the  Hazard  and  Harlan  coals  to  be  made  available  for  fuel  supply  to  the  Atlantic 
Coast  Line  system  in  the  Carolinas,  great  advantages  to  the  entire  system  might 
accrue.  But  it  is  to  the  Seaboard  Air  Line,  smallest  and  weakest  of  the  southern 
systems,  that  the  Clinchfield  road  is  most  nearly  indispensable.  As  already  set 
forth,  the  Seaboard  has  no  independent  coal  supply.  The  Clinchfield,  if  incorporated 
therein,  would  put  it  into  the  heart  of  the  great  fuel  reserves  of  the  south. 

The  relationship  of  the  Clinchfield  as  a  bridge  in  long-haul  through-rout*  develop- 
ment to  these  several  southern  systems  must  also  be  comprehended.  On  the  north 
its  connection  is  direct  with  Cincinnati  over  the  CTiesapeake  &  Ohio,  as  shown  by 
dotted  lines  on  maps  10,  11,  and  13.  Unfortunately,  in  the  past  this  road  has  ap- 
parently given  slight  consideration  to  the  possibilities  of  through  carriage.  This  is 
possibly  due  to  the  major  interest  of  the  Chesapeake  A  Ohio  in  the  Virginia  gateways, 
which  afford  it,  of  course,  a  much  longer  haul  to  and  from  the  west.  But  there  can  be 
little  question  that  the  national  interest  demands  that  greater  attention  be  given  to 
the  provision  of  this  new  throu^  route  between  the  west  and  the  Carolinas.  Toward 
the  south  a  through  route  utilizing  the  Clinchfield  bridge,  judging  by  maps  10,  11, 
And  13,  is  most  naturally  constituted  either  over  the  Atlantic  Coast  Line  from.  Spartan- 
burg (map  11)  or  by  way  of  the  Southern  Railway  via  Columbia,  S.  C,  thence  to 
Charleston  and  Savannah  (map  10).  The  little  Georgia  &  Florida  Railway  (map  II ), 
recommended  for  inclusion  in  the  Louisville  &  Nashville- Atlantic  Coast  T  ine  system, 
contends  that  it  is  naturally  serviceable  in  the  constitution  of  such  a  through  route 
down  into  Florida.  The  Seaboard  in  this  conBection  (map  13)  is  relatively  weak. 
Its  lines  are  so  located  that  it  could  make  at  present  but  very  indirect  use  of  the 
Clinchfield  road  as  a  great  north-and-south  bridge.  Until  it  connects  Spartanburg 
and  Columbia,  S.  C,  by  tra(*kage  or  over  its  own  rails,  it  is  ill-suited  to  perform  this 
necessary  function. 

Certain  details  of  the  history  of  the  Clinchfield  in  its  relation  to  its  neighbors  are 
pertinent.  The  road  apparently  was  projected  by  the  same  people — the  Blair 
interests — who  then  controlled  the  Seaboard  Air  Line.  The  Cumberland  corporation, 
dissolved  in  1918,  was  originally  a  holding  company  which  included  certain  Clinch- 
field  coal  properties,  parts  of  the  Clinchfield  as  successively  built,  and  a  large  block 
of  Seaboard  Air  Line  stock.    The  coal  properties  were  first  sold,  and  then  the  Seaboard 

as  I.e.! 


CONSOLIDATION    OF   RAILKi 


553 


holdings,  leaving  only  the  Clinchfield  stock  at  the  time  of  dissolution.  The  Seaboard 
is  said  to  have  had  a  charter  itself  to  build  upon  this  location;  and  it  is  alleged  that  the 
Clinchfield  was  built  specifically  to  serve  that  property.  Certainly  the  same  people 
were  heavily  interested  in  both  companies,  and  on  behalf  of  the  Seaboard  Air  Line  it 
seems  to  have  been  expected  that  ultimately  the  Clinchfield  would  become  part  of  the 
Seaboard  system.  A  lease  of  the  Clinchfield  to  the  Seaboard  was  in  fact  almost 
consummated  at  the  time  of  the  Hawley  administration  of  the  Chesapeake  &  Ohio. 
This  latter  road,  especially  its  traffic  people,  have  also  kept  a  watchful  eye  upon  its 
(le\elopment  and  are  said  in  fact  to  have  ''almost  flirted"  with  it  some  years  ago. 
iiut,  unfortunately,  despite  the  paramount  interest  of  the  Seaboard  Air  Line,  it  seems 
not  to  have  been  fully  alive  to  the  possibilities  of  the  Clinchfield  road  for  independent 
successful  operation.  It  is  even  charged  that  unwillingness  to  cooperate  with  the 
( 'linchfield  and  the  general  attitude  respecting  a  lease  indicate  an  anticipation  that 
it  might  be  subsequently  acquired  more  cheaply  after  its  downfall  financially.  At  all 
e\  ents,  a  sharp  division  of  policy  is  apparent  in  the  Clinchfield  management.  Certain 
members  have  been  consistently  favorable  to  the  Seaboard  affiliation,  but  certain 
others  have  resented  some  aspects  of  interchange  and  policy  of  the  Seaboard  people, 
and  in  the  meantime  the  record  shows  that  the  Southern  Railway  has  assiduously 
cultivated  the  Clinchfield.  It  is,  indeed,  alleged  to  have  been  as  friendly  as  the 
Seaboard  was  the  reverse.  At  all  events,  the  interchange  of  traffic  with  the  Southern 
Railway  has  most  rapidly  developed  in  recent  years,  and  this  relationship  was 
strengthened  by  the  federal  Railroad  Administration,  which  allocated  the  Clinchf  eld 
to  the  Southern  system  for  operation.  This  was  done  particularly  in  order  to  facilitate 
direc  t  (oal  shipments  rather  than  by  the  roundabout  route  through  Paint  Rock, 
already  described.  The  friendly  relation  with  the  Southern  system  has,  in  fact, 
crystallized  into  a  profitable  traffic  agreement  which  is  alleged  to  be  more  favorable 
than  is  a.iorded  by  any  other  railroad  thereabout. 

Analysis  of  the  traffic  interchange  between  the  Clinchfield  and  the  three  principal 
syst^'ms  operating  in  the  Carolinas  confirms  the  impression  as  to  the  great  and  in- 
creasing preponderance  of  business  with  the  Southern  Railway.  The  bulk  of  the  total 
Clinchfield  traffic,  about  70  per  cent,  is  coal,  most  of  which  is  distributed  in  North 
Carolina,  Georgia,  and  Florida  and  the  Spartanburg  district  of  South  Carolina,  to- 
gether with  a  growing  movement  of  fuel  to  Charleston  for  export.  Of  the  coal  de- 
liveries by  the  Clinchfield  to  all  its  connections,  the  proportion  going  to  the  Southern 
Railway  increased  from  51  per  cent  in  1917  to  71  per  cent  in  1920.  The  coal  de- 
liveries, both  to  the  Atlantic  Coast  Line  and  the  Seaboard,  during  the  corresponding 
pi^riod  appreciably  diminished.  The  Atlantic  Coast  Line  received  29  per  cent  of  the 
coal  in  1917  and  only  20  per  cent  three  years  later.  And  the  Seaboard  Air  Line,  which 
received  only  14  per  cent  in  1917,  shrunk  to  6  per  cent  in  1920.  As  to  receipts  of 
fniscellaneous  freight,  the  proportions  remain  substantially  unchanged  during  this 
period,  and  the  deliveries  of  miscellaneous  freight  remain  distributed  among  the 
three  i>rincipal  companies  about  constant.  The  Southern  Railway  not  only  receiA  ed 
almost  three-quarters  of  the  Clinchfield  coal  delivered  to  connections  in  1920;  it  also 
turned  over  to  the  Clinchfield  in  exchange  a  substantial  amount  of  its  Virginia  c  oal, 
25,f{5fi  cars  in  1920.  In  brief,  the  Clinchfield  interchange  with  the  Southern  Railway 
L'reatly  exceeds  that  with  all  other  lines  combined.  This  is  partly  the  result  of  the 
natural  geographical  relationship  abo\e  described;  it  also  followed  upon  the  arrange- 
ment under  federal  control,  since  embodied  in  the  traffic  agreement  above  mentioned, 
under  which  the  Southern  Railway  most  advantageously  turns  o\  er  the  greater  part 
of  its  coal  southbound  because  of  the  numerous  grades  and  heavy  curvature  on  the 
Southern  Railway  route.  This  diversion  also  relieves  the  Paint  Rock  route,  enabling 
it  to  handle  the  heavy  miscellaneous  freight  traffic  as  well  as  coal  entering  from.  Ten- 
nessee and  Kentucky.    The  arrangem.ent  at  once  yields  the  Clinchfield  a  profit  and 

c:^Lc.c. 


^L- 


,-T 


« 


554 


INTERSTATE  COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION   OF   RAILROADS. 


555 


relieves  the  Soiithem  Railway  of  imdue  operating  expense  and  of  the  necessity  of 
rebuilding  its  own  difficult  coal  lines. 

Financially,  judging  by  the  returns  for  the  typical  year  1917,  the  Carolina,  Clinch- 
field  &  Ohio  has  a  large  railway  operating  revenue  per  mile  of  line,  $13,411,  which 
yielded  a  net  operating  income  per  mile  of  line  in  1917  of  |5,073.  This  exceeds  the 
net  operating  income  by  far  for  all  the  other  southern  roads  except  the  Alabama  Great 
Southern,  which  of  course  is  also  a  main  stem.  Even  the  Illinois  Central,  as  shown 
by  the  comparative  returns  on  page  538,  had  a  net  operating  income  per  mile  of  line 
in  1917  of  only  $3,417.  But  the  handicap  of  the  Clinchfield  is  the  enormous  capital 
account,  $189,627  per  mile  of  line.  This  is  over  three  times  the  corresponding  figure 
*or  the  Louisville  &  Nashville,  and  practically  five  times  the  investment  account  of 
the  Atlantic  Coast  Line.  The  Southern  Railway  has  a  high  investment  account, 
but  for  the  Clinchfield  it  is  considerably  more  than  twice  as  great.  This  heavy  in- 
vestment account,  due  partly  to  the  difficult  and  expensive  construction,  partly  to 
the  thoroughness  of  the  work,  reduces  the  percentage  of  net  operating  income  to 
investment  to  the  lowest  figtu"e  for  any  of  the  six  leading  southeastern  railways  (page 
538).  Either  reorganization  with  a  reduction  of  the  capital  account,  or  an  extended 
support  through  a  policy  of  free  interchange  of  traffic  from  its  neighbors,  is  evidently 
necessary  to  bring  this  property  up  to  a  parity  with  the  general  standard  for  the  region. 
It  is  in  part  because  of  this  necessity  of  support  and  interchange  in  order  to  realize 
the  magnificent  possibilities  to  which  the  road  is  entitled  that  certain  recommendations 
for  joint  participation  in  its  affairs  are  made.  It  would  not  be  made,  otherwise,  for  it 
is  believed  that  an  examination  of  the  operating  accounts  of  most  jointly  controlled 
propjerties  will  show  a  lack  of  the  economy  and  efficiency  which  obtains  under  con- 
centrated responsibility. 

In  conclusion,  it  is  clear  that  while  originally  the  Seaboard  stood  closest  to  the 
Clinchfield  enterprise,  that  the  rdle  of  next  friend  has  been  most  successfully  assumed 
by  the  Southern  system.  The  Seaboard,  to  be  sure,  has  no  other  coal,  but  its  lines 
traverse  a  distinctly  nonindustrial  district,  so  that  the  major  part  of  its  reliance  is  for 
company  fuel.  And  most  of  the  coal  now  taken  by  the*  Atlantic  Coast  Line  is  like- 
wise for  its  own  fuel.  The  Southern  Railway,  traversing  the  great  industrial  ])ied- 
mont  belt,  has  assuredly  built  itself  into  the  enterprise.  For  this  reason  it  is  recom- 
mended that  the  Clinchfield  be  merged  with  the  Southern  Railway.  But.  neverthe- 
less, the  interest  of  the  other  railways  above  outlined  in  this  important  enterj)ri8e 
should  be  protected.  The  Clinchfield  can  hardly  be  regarded  as  purely  local  in  charac- 
ter; yet  the  proposal  to  vest  its  control  in  a  joint  holding  by  the  Coast  Line,  the  Sea- 
board, and  the  Southern  is  rejected  on  the  ground  that  it  does  not  conduce  to  upkeep 
and  efficient  operation  to  the  same  degree  as  an  undivided  proprietary  relationship. 
To  make  the  Southern  Railway  distinctly  responsible  for  the  property  and  then  to 
invite  such  trackage  arrangements  as  shall  protect  the  reasonable  interest  of  neighbor- 
ing railroadi?,  commends  itself  as  the  wisest  plan  under  all  the  circumstances.  WTiether 
or  not  the  high  capital  accoimt  is  excessive  will  depend  upon  the  results  of  federal 
valuation,  and  the  terms  under  which  it  might  be  taken  over  must  of  necessity  be  the 
result  of  a  trade. 

The  Richmond-Washington  Company,  incorporated  in  New  Jersey  in  1901,  owns 
about  two-thirds  of  the  voting  common  stock  of  the  Richmond.  Fredericksburg  & 
Potomac  Railway  and  all  of  the  stock  of  the  Washington  Southern.  It  thus  controls 
the  Union  Railway  line  between  Washington  and  Richmond.  Va.  This  again  is  a 
bridge  used  by  the  six  railways  entering  from  the  south.  These  six  roads  are  the 
Pennsylvania,  the  Atlantic  Coast  Line,  the  Baltimore  &  Ohio,  the  Southern,  the 
Seaboard,  and  the  Chesapeake  &  Ohio.  Each  of  these  six  railways  owns  one-sixth  of 
the  capital  stock  of  the  Richmond-Washington  Company,  Our  consolidation  plan 
proposes  no  disturbance  to  this  arrangement.    Tlie  suggestion  as  to  a  detour  from  the 

63  I.  C.  C. 


west  around  Washington  (page  501)  is  intended  to  be  worked  out  in  connection  with 
this  existing  scheme  for  joint  operation  of  the  bridge  line  to  Richmond.  But  other- 
wise conditions  may  well  be  allowed  to  go  on  as  they  stand  at  present. 

The  geographical  location  of  the  Florida  East  Coast  Railway  is  depicted  on  maps 
10,  11,  and  13.  It  is  plotted  in  its  relation  to  all  these  southeastern  railways  because 
of  the  fact  that  it  is  a  bridge  line,  operating  in  a  territory  which  assuredly  will  not 
support,  at  least  for  many  years  to  come,  another  competing  line.  The  entire  coimtry 
is  dependent  upon  it  for  rail  connection  with  Cuba,  the  operation  of  car  ferries  to 
Havana  having  been  initiated  in  1915.  Such  properties,  lying  on  the  confines  of 
the  United  States,  are  entirely  analogous  to  the  New  England  railroads  or  those  which 
occupy  the  Michigan  peninsula.  For  all  such  roads,  in  so  far  as  they  perform  a  uni- 
versal service  either  as  terminals  or  as  bridges  to  something  beyond,  the  policy  which 
has  thus  far  been  pursued  in  these  other  cases  is  again  reconmiended  for  the  Florida 
East-  Coast  Railway.  It  would  be  a  manifest  injustice  and  a  hardship  to  other  rail- 
roads to  tie  this  property  up  to  any  single  system.  Fortimately  the  financial  status 
based  upon  the  returns  for  the  typical  year  1917  is  so  near  normal  that  the  road  may 
be  trusted  to  pursue  its  own  course.  It  neither  has  strength  to  contribute  to  others, 
nor  does  it  need  to  draw  upon  its  neighbors  for  support.  The  percentage  of  net  oper- 
ating income  to  investment  in  road  and  equipment  for  1917  was  4.74.  This,  for  a 
rapidly  growing  property,  is  about  as  near  as  one  coiild  hope  to  find  to  the  standard  of 
5  per  cent  for  1917,  elected  as  a  standard  for  the  country  as  a  whole.  It  is  recom- 
mended, therefore,  that  the  Florida  East  Coast  Railway  remain  independent,  or  else 
that  some  plan  be  evolved  which  shall  guarantee  by  joint  control  equal  and  impartial 
treatment  for  the  Southern  Railway,  the  Louisville  &  Nashville-Atlantic  Coast  Line 
system,  and  the  Seaboard  Air  Line. 

The  statistical  summary  herewith  is  intended  to  show  the  probable  results  upon 
net  operating  income  in  proportion  to  investment  of  the  mergers  herewith  recom- 
mended. The  calendar  year  1917  is,  as  usual,  chosen  as  typical.  Briefly  stated,  the 
results  are  as  follows: 


System. 


Southern  Railway 

Louisville  &  NasJiville- Atlantic  Coast  Line 

Illinois  Central , 

Seaboard  Air  Line 

Florida  East  Coast 


Percentage 
relation; 
net  oi>er- 
ating  in- 
come to 
investment 
inroad 
equip- 
ment. 


4.31 
5.34 
4.83 
3.45 
4.74 


Road  and 
equipment 
investment 

per  mile 
of  line. 


$75,392 
48,634 
58,005 
54,515 
67,236 


Thus  it  appears  that  the  earning  power  of  these  systems  while  by  no  means  equal 
so  far  as  one  can  predict  by  such  data,  is  more  nearly  equal  than  in  the  case  of  the 
constituent  roads,  each  taken  separately.  As  was  expected,  the  percentage  of  net 
operating  income  to  investment  is  well  below  par  for  the  Seaboard  at  3.45,  but,  on  the 
other  hand,  the  investment  account  for  the  Seaboard  stands  at  154,515,  a  figure  ap- 
proximating that  for  the  Illinois  Central  and  substantially  higher  than  for  the  Louis- 
ville &  Nashville- Atlantic  Coast  Line  system.  The  results  of  federal  valuation  can 
alone  be  depended  on  to  show  whether  this  investment  account  of  the  Seaboard  is  ex- 
cessive. And  if  indeed  it  be  so,  then  the  percentage  of  net  operating  income  thereon 
will  be  automatically  increased.  Such  a  check  on  these  results  in  terms  of  valuation 
rather  than  capital  account  is,  of  course,  necessary  as  a  basis  for  any  final  dependable 
conclusions. 

63  I.  C.  C. 


»• 


*u^ 


556 


I 


J 


INTEKSTATE  COMMERCE  COMMISSION  REPORTS. 
Chapter  V.— The  Western  Transcontinental  Region-, 


(CONSOLIDATION   OF   RAILROADS, 


557 


Through  routes  determined  primarily  by  seven  available  Rocky  Mountain  gateways^ 
^7. — ^Matching  these  within  three  groups,  as  also  group  against  group,  558. — 
Geographical  distribution  of  mileage  based  on  population,  a  complication,  558 . — 
Denver  conditions  as  an  illustration,  559. — Decision  to  extend  all  systems  into 
Chicago,  559. — Traffic  analysis,  indicating  importance  of  carloads  and  of  special 
equipment  in  solid  trainloads,  559. 

The  western  situation  most  broadly  considered,  560.— The  Union  Pacific,  a  key  road,, 
strongest  and  most  direct  through  line,  560.— The  Western  Pacific-Denver  & 
Rio  Grande  also  pivotal  as  a  matched  bridge  line,  561. — The  Burlington  as  a 
support  for  the  precarious  bridge,  matched  against  the  Union  Pacific,  562,— 
Biu-hngton  must  derive  added  strength  from  a  northern  through  line,  562.— The 
Santa  Fe,  a  second  possible  supporter  of  the  Western  Pacific-Denver  &  Rio 
Grande  bridge,  563. — The  Chambers  comprehensive  plan,  its  advantages  and 
defects,  563. — Possible  modifications  of  a  Santa  Fe-Denver  &  Rio  Grande  plan, 
564. ^General  competitive  situation,  north  and  south,  especially  the  Panama 
Canal,  as  affecting  a  choice  between  the  Burlington  and  the  Santa  Fe,  565. — 
Final  selection  of  the  Burlington  road  as  counterpoise  for  the  Union  Pacific,  566, 

The  northern  twin  cities  transcontinental  group  described.  566, — Objection  on  com- 
petitive grounds  to  three  northwestern  through  systems,  567. — Not  enough 
good  Chicago  connections  for  three  such  sjstems,  567.— Two  instead  of  three 
chosen,  568.— Broader  advantages  considered,  568.— A  Burlington-Northern 
Pacific- Western  Pacific  combination  necessary  as  a  counterpart  of  the  Union 
Pacific-North  Western-Central  Pacific  line,  568.— Alternatives  considered  spell 
widespread  dismemberments,  568.— St.  Paul-Northern  Pacific  combination 
advantageous  for  operation,  but  fatal  to  competition,  569.— Merits  of  a  St.  Paul- 
Great  Northern  merger,  commercial  and  financial,  commend  this  choice,  570.— 
The  final  test  of  financial  stabilitv,  570.— Western  additions  necessarv  to 
round  out  such  a  system,  573.— Proposed  changes  at  the  eastern  end,  573.— 
The  Soo  lines  added,  if  available  for  consolidation,  573— Other  possible 
reenforcement,  573. 

The  Union  Pacific  closely  related  to  the  Chicago  &  North  Western  at  Omaha,  574. — 
The  Wabash  western  lines  for  a  Union  Pacific  entrance  to  St.  Louis,  with  minor 
eastern  additions,  575.— Judicial  attempts  to  separate  the  Central  Pacific  from  the 
Southern  Pacific,  576. — These  two  properties  historically  and  organically  interre- 
lated, 576. — The  geographical  location  indicating  interdependence  (map),  576. — 
Financial  relationships  also  intricate,  577.— This  case  to  be  judged  by  economic 
rather  than  legal  reasoning,  578.— Complete  country-wide,  not  half-hearted  of 
local  competition,  essential,  578.— General  outline  of  transcontinental  competi- 
tion, 578.— Territorial  limitation  of  Sunset  Route  competition,  578.— Theoreti- 
cally, north-and-south  gathering  lines  distinct  from  east-and-west  long-haul 
lines  desirable,  579.— Physical  upbuilding  and  development  of  Central  Pacific 
favored  by  unmerger,  580.— The  Pacific  Railroad  acts  again,  580.— Finally 
Central  Pacific  merger  needed  to  balance  the  Burlington- Western  Pat  ific  through 
line,  580.— Temporary  prejudicial  effect  upon  local  transportation,  a  vali_d 
objection,  581.— Agreement  for  dissolution  in  1914  establishes  pfttcticability^ 
581. -Pacific  coast  public  sentiment  versus  national  interest  and  policy,  586. — 
Possible  advantages  of  transfer  of  Southern  Pacific  lines  in  Oregon  to  the  Union 
Pacific,  586.— Objections  thereto  are  conclusive,  588— National  defense 
requires  completion  of  an  interior  north-and-south  line  of  ypmmunication,  589. — 
Ret-apitulation  of  distribution  of  California  and  Oregon  lines,  589.  ' 

03  I.  C.  C, 


( 'hicago,  Burlington  &  Quincy-Northem  Pacific  to  preserve  balance  of  power  against 
TTie  Union  Pacific-North  Western,  590. — Traffic  interchange  at  Billings.  Mont., 
591. — ^The  Denver  &  Salt  Lake  project  essential  to  future  development,  591.— 
Its  relation  to  Denver  &  Rio  Grande  and  Western  Pacific,  '92. — Alternative 
alliance,  592. — Terminals  at  San  Francisco,  592. — (hicago  Great  Western 
provides  necessary  connections  between  twin  cities  and  Missouri  River  gateways^ 
593. — The  Minneapolis  &  St.  Louis  used  still  further  to  supplement  deficiencies 
southwest  of  Minneapolis  and  St.  Paul,  593. — ^Northern  Pacific  should  have 
trackage  into  Great  Falls,  Mont.,  district,  594. — The  possible  inclusion  of  the 
Mobile  &  Ohio  as  a  Gulf  line,  594. 

Strengthening  the  St.  Paul-Great  Northern  combination  by  addition  of  the  Minne- 
apolis, St.  Paul  &  Sault  Ste.  Marie  Railway,  595. — Local  traffic,  lumber  and 
coal  business  might  help,  596. — Two  iron-ore  roads  added  for  furnace  coal  strength, 
597. — Protecting  the  St.  Paul-Great  Northern  by  trackage  contract  at  Council 
Bluffs,  598. — Terre  Haute  &  Southeastern  merger,  and  the  Indiana  line  of  the 
Chicago  &  Eastern  Illinois,  593. — Independent  access  to  St.  Louis  and  other 
minor  changes,  599. 

The  Chicago.  Rock  Island  &  Pacific  intimately  related  to  the  Southern  Pacific,  600. — 
Each  partner  contributes  elements  of  strength,  601. — Provision  of  a  line  from 
Memphis  up  to  Burlington,  Iowa,  desirable,  602. — (-ertain  minor  changes  in 
the  Rock  Island.  604. — Several  mergers  of  Texas  properties  in  the  Southern 
Pacific,  604. — What  shall  be  done  with  the  Northwestern  Pacific?  605. 

The  Atchison,  Topeka  &  Santa  Fe.  compact,  complete,  and  impregnable,  605. — An 
entrance  to  St.  Louis  proposed,  606. — Access  to  New  Orleans  by  merger  of 
the  Gulf  Coast  Lines,  607. — Peculiar  importance  of  the  (V)lorado  &  Southern  8\'8- 
tem,  608. — Choice  between  the  Santa  Fe  and  the  Southern  Pacific-Rock  Island. 
608. — Serious  disadvantages  of  Santa  Fe  merger,  609. — Rock  Island  affiliation 
also  rejected.  609  — ^Made  a  neutral  through  route  in  the  Missouri  Pacific  system, 
610. — (^ertain  minor  Santa  Fe  changes,  611. 

Geographical  test  of  foregoing  combinations  (maps),  611. 

Statistical  verification  of  earning  power  in  terms  of  investment  account  for  pro])oged 
five  systems,  613. 

The  grand  strategy  for  transcontinental  traffic  in  western  territory  necessarily 
depends  upon  the  supply  of  available  through  routes  connecting  either  Chicago  or 
St.  Louis  with  the  Pacific  coast.  And  the  number  of  passes  through  the  Rocky 
Mountain  barrier,  either  now  traversed  or  remaining  for  future  construction,  must 
in  turn  be  ultimately  decisive  in  fixing  the  numl^er  of  these  competitive  routes. 
The  gateways,  therefore,  are  the  starting  points  of  analysis.  The  location  of  the  water- 
shed, or  father  of  the  most  difficult  Rocky  Mountain  territory,  is  indicated  roughly  on 
map  14  by  a  dotted  line.  This  runs  from  the  neighborhood  of  Spokane,  Wash. ,  straight 
toward  Puel)lo,  Colo.,  but  turns  southwesterly  before  reaching  that  point  and  passes 
off  toward  Mexico  across  Arizona.  The  gateways  through  this  bai'rier  at  present  in 
use  are  limited  to  seven;  and  the  stems  of  the  seven  shorter  transcontinental  routes, 
stripped  of  all  branches  and  feeders  which  serve  these  gateways,  are  likewise  shown 
upon  map  14.  The  number  of  these  gateways  is  thus  strictly  limited.  But  that  is  not 
all.  These  transmountain  routes  evidently,  by  the  map,  lie  in  three  groups — northern, 
middle,  and  southern,  respectively.  In  the  northern  group  there  are  three  lines: 
The  Great  Northern,  the  Northern  Pacific,  and  the  Chicago,  Milwaukee  &  St.  Paul. 
Then  proceeding  southward  there  is  an  unbroken  barrier  across  Idaho  and  Wyoming 
at  present  not  penetrated  by  rail.  The  middle  group  of  gateways  is  located  in  Wyo- 
ming and  Colorado.  There  is  the  Union  Pacific  at  Cheyenne,  north  of  Denver,  and 
south  of  Denver,  penetrating  the  mountains  behind  Pueblo,  is  the  Denver  &  Kio 

r>8  I.  C.  C. 


558 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


Grande.  Still  following  southward  along  the  Rocky  Mountains  there  is  a  wide  desert 
strip  of  territory  until  one  reaches  the  southern  gateways  across  Arizona  and  New 
Mexico.  These  states  are  traversed  by  the  Santa  Fe  and  the  Southern  Pacific  lines. 
This  completes  the  present  array  of  possible  transcontinental  stems.  The  most  proba- 
ble construction  in  the  future  which  will  tie  in  the  Pacific  coast  with  dsmontane 
territory  is  the  provision  of  some  through  route  passing  directly  by  Denver,  for  at 
present  the  existing  gateways  lie  about  equidistant  north  and  south  of  that  city.  And 
then  some  day  a  way  will  doubtless  be  found  by  which  the  Burlington  may  penetrate 
the  great  mountain  barrier. 

The  western  transcontinental  problem  thus  resolves  itself  into  such  an  arrangement 
of  these  seven  existent  stems  as  shall  best  preserve  a  well-balanced  competition 
within  each  of  the  three  territorial  groups  above  described,  and  which,  again,  in  an 
even  broader  way,  shall  promote  a  normal  rivalry  as  between  group  and  group,  cover- 
ing the  entire  transcontinental  field  from  Canada  to  Mexico.  It  thus  appears  that 
there  are  two  distinct  phases  of  the  matter  in  hand.  One  obtains  locally  within  each 
of  the  three  subdistricts  taken  by  itself— southern  California  or  Washington-Oregon, 
for  example.  The  other  phase  is  completely  national,  as  comprehensive  in  scope  as 
the  entire  field  of  the  United  States  west  of  the  Mississippi.  Of  these,  the  latter, 
because  of  its  comprehensiveness,  merits  first  consideration.  After  its  analysis,  the 
more  restricted  phase,  group  by  group,  will  be  taken  up,  and  then  in  conclusion  the 
individual  systems  within  each  subdistrict  may  be  treated  in  detail.  Such  is  the 
general  plan  of  campaign  to  be  pursued.  And  in  and  through  it  all,  furthermore,  to 
conform  to  the  statute,  there  must  be  as  little  disturbance  as  possible  of  existing 
corporate  relationships  and  of  the  present  currents  of  traffic. 

The  situation  in  western  territory  is  greatly  complicated  by  a  general  circumstance 
again  well  illustrated  by  map  14,     The  population,  proceeding  westward,  becomes 
progressively  less  dense  as  one  approaches  the  Rocky  Mountains  and  the  nimiber  of 
east-and-west  lines  with  through  connections  to  the  coast  also  lessens.     The  entire 
railway  net,  comprising  branches  and  feeders,  necessarily  becomes  more  open  west 
of  middle  Kansas,  Nebraska,  and  the  Dakotas.    These  east-and-west  plain  lines  natu- 
rally end  at  important  centers  like  Omaha  and  Denver.    And,  to  a  considerable 
degree,  the  situation  at  St.  Paul-Minneapolis  is  the  same.    More  through  lines,  in 
short,  enter  each  of  these  cities  from  the  east  than  there  are  available  through  lines 
leaving  them  toward  the  west.     The  neck  of  the  bottle,  in  other  words,  becomes 
progressively  narrower.     This  circumstance  greatly  complicates  the  strategic  analysis, 
for  it  forces  a  choice  as  to  stem  connections  among  a  much  greater  nimiber  of  available 
roads  toward  the  east  than  the  seven  possible  gateways  which  penetrate  the  Rocky 
Mountains.    Many  are  called,  but  few  can  possibly  be  chosen.    Not  only  must  the 
choice  be  made,  but  provision  must  follow  for  those  lines  which  are  rejected  as  through 
routes.     Stated  in  another  way,  the  lines  within  this  territory  are  distinguishable 
into  two  groups,  according  to  their  character.    One,  out  on  the  open  plains,  is  con- 
stituted mainly  of  the  so-called  granger  roads  which  originally  stopped  short  of  the 
base  of  the  mountains.     These  roads  ramify  widely  and  have  a  large  proportion  of 
local  business.    The  other  type  consists  of  the  bridge  lines.    They  traverse  the 
inhospitable  deserts  or  mountain  territory,  relying  upon  through  traffic  moved  in 
solid  trainloads.    There  is  relatively  little  local  business.    Such  are  the  Central 
Pacific  and  the  Western  Pacific,  entirely  separate  entities.    At  times  corporatively 
their  fate  is  merged  with  other  roads,  such  as  the  Southern  Pacific.    And  some  of  the 
lines  are  resolvable  into  two  elements,  only  the  western  of  which  is  properly  a  bridge 
line.    This  is  the  case  with  the  St.  Paul-,  the  Great  Northern,  and  the  Northern 
Pacific.    But  whether  actually  separated  as  distinct  corporations  or  not,  the  difference 
between  the  ordinary  railroad  and  the  mere  bridge  line  is  basic  and  dfeterminant. 

63 1.  C.  C. 


CONSOLIDATION   OF  RAILROADS. 


559 


The  practical  effect  of  the  foregoing  condition  is  well  exemplified  in  detail  by  the 
Colorado  situation.  Denver,  the  leading  commercial  center  in  the  middle  Rocky 
Mountain  territory,  is  entered  from  the  east,  as  map  14  shows,  by  six  railroads;  •whereas 
there  are  only  two  lines,  the  Union  Pacific  and  the  Denver  (fe  Rio  Grande,  which  go  out 
due  west.  These  six  railroads  from  the  east  are  indicated  by  dotted  lines  on  the  map. 
They  are,  from  north  to  south,  the  Union  Pacific,  the  Burlington,  the  Rock  Island,  the 
Kansas  Pacific  (Union  Pacific  system),  together  with  the  Missouri  Pacific  and  the 
Santa  Fe  lines  into  Denver  via  Pueblo .  Obviously  only  two  of  these  six  lines  entering 
tfrom  the  east  can  be  treated  as  trunk  Unes,  to  be  linked  up  with  the  two  roads  which 
penetrate  the  mountain  barrier  westward.  To  be  sure  one  might  attempt  to  provide 
•each  westward  stem  with  two  trunk  lines  to  Chicago  and  St.  Louis  respectively.  But 
even  then,  only  four  of  the  six  available  lines  across  the  plains  would  be  utilized.  It 
is  evident  that  some  stub  ends  must  be  left  in  any  event.  The  point,  however,  at  this 
moment  is  to  indicate  the  nature  and  the  necessity  of  the  choice  with  which  one  is 
■confronted.  Not  yet  need  the  choice  actually  be  made.  That  step  will  be  taken  in 
due  course.  A  precisely  similar  complication  presents  itself  at  the  twin  cities,  as  it 
^11  appear,  where  six  trunk  lines  enter  from  Chicago  and  only  three  (with  possibly  one 
more  through  Canada)  go  out  toward  the  west.  The  number  of  roads  entering  Omaha 
and  leaving  it  east  and  west  respectively  is  even  more  ill -balanced.  Kansas  City  is 
more  fortunately  situated,  owing  to  the  number  of  stems  southward  to  the  Gulf  of 
Mexico .  But  the  roads  thereabouts  are  to  be  considered  in  a  Gulf  group  by  themselves . 
They  need  not  complicate  the  transcontinental  situation. 

A  general  principle  must  be  settled  at  this  point,  before  laying  a  shoiJder  to  the  main 
propositions.  Why  should  all  these  transcontinental  systems  be  based  upon  Chicago 
in  fact ,  rather  than  upon  the  twin  cities  and  the  Omaha  gateways  respectively?  It  ha s 
been  urgently  represented,  especially  by  the  Union  Pacific,  that  the  western  trans- 
•continental  situation  does  not  demand  the  severely  logical  projection  of  all  these 
systems  into  a  common  base  at  Chicago.  This  point  is  discussed  more  fully  in  another 
connection,  but  the  final  judgment  rests  upon  the  policy  laid  down  by  the  majority  of 
these  roads  themselves.  The  scope  and  reach  of  the  most  comprehensive  ones  pre- 
scribe in  fact  the  raiige  to  be  given  to  their  competitors;  and  inasmuch  as  the  Santa  Fe, 
the  St.  Paul,  and  the  Hill  lines  have  all  elected  to  conduct  transcontinental  business 
competitively  under  unified  ownership  clear  through  from  the  Pacific  coast  into 
Ohicago,  it  seems  imperative  that  the  same  scope  should  be  given  to  all  the  rest.  The 
price  paid  is  avowedly  a  heavy  one;  for  the  open  market  for  choice  of  routing  at  the 
Missouri  River  gateways  and  at  the  twin  cities  is  bound  to  be  restricted  by  the  pro- 
vision of  these  corporatively  unified  through  routes.  But  the  advantage  on  the  whole 
seems  to  compensate  for  the  loss  in  flexibility  which  must  necessarily  result .  The  fact 
that  the  Gulf-Southwestern  Unes  have  also  been  projected  into  Chicago  under  this  plan 
is  also  by  no  means  immaterial. 

Certain  peculiarities  of  transcontinental  traffic,  particulJarly  from  California,  deserve 
mention  on  account  of  their  bearing  upon  problems  of  operation.  One  of  these  is  the 
large  proportion  of  tonnage  transported  in  refrigerator  cars  or  other  forms  of  special 
equipment.  Fruit,  packing-house  products,  and  fresh  vegetables  all  require  such 
special  equipment.  Many  of  them  require  fast  movement  on  account  of  the  perish- 
able nature  of  the  goods.  The  total  freight  earnings  of  the  Santa  Fe  for  1917 
amounted  to  $110,000,000.  These  earnings  were  distributed  among  staple  commodi- 
ties as  follows: 

Fruit  and  vegetables $10,000,000 

Grain 8,000,000 

Livestock 6,000,000 

Coal  and  coke - 7,000,000 

Crude  and  refined  oil 10,000,000 

Lumber 7,000,000 

Total 48,000,000 

63 1.  C.  C. 


4h 


^iB 


!l      ' 


CONSOLIDATION   OF   RAILROADS. 


561 


560 


m 


.|1  p 


Interstate  commerce  commission  reports. 


A  corresponding  exhibit  for  the  Southern  Pacific  lines  west  of  El  Paso  and  Ogden, 
covering  movement  in  carloads  to  points  east,  during  the  calendar  year  1917,  is  also 
reproduced. 


Commodity. 


Tonnage. 


Fresh  fruit  and  vegetables 870  644 

Smelter  products "  523'  407 

Other  a^icultural  products ...............!!.!..!!  1 ,  063*  053 

Animals  and  flsh,  and  products I  '  147' 009 

Forest  products [ I  573'  705 

Ca n  ned  goods !.....'..!...!!".!]" '  298,'  6 1 3 

Suear J  264,074 

Other  manufactured  products j  554  574 

Other  mineral  products \  31o' 06:} 

Miscellaneous  products "... .\ .'..[['.'.'. .\ .][..][ .1  21  320 


Total. 


4,632,462 


Propor- 
tion. 


Per  cent. 
18.8 
11.3 
22.9 

3.2 
12.4 

6.4 

5.7 
12 

6.7 
.6 

100 


This  second  exhibit,  it  will  be  noted,  is  for  tonnage  and  not  earnings.  But  the  agree- 
ment is  significant.  For  both  roads,  approximately  one-fifth  of  the  staple  traffic 
named,  as  it  appears,  is  fresh  fruit  and  vegetables.  For  the  Santa  Fe  another  fifth  is 
constituted  for  the  m  ovement  of  oil .  also  special-eq  uipment  b  usiness . 

Traffic  analysis  of  the  Union  Pacific  interchange  at  Council  Bluffs  still  further 
emphasizes  the  importance  of  the  transcontinental  tonnage  moved  in  special  equip- 
ment.   The  number  of  carloads  for  1920,  of  such  products  eaetbound  was  as  follows: 

Eggs  and  poultry ; 218c3rlrads. 

Citrus  fruits 9^ 76  carloads. 

Apples  and  other  fresh  fruits 32, 909  carloads. 

Vegetables 4,210c-arlcads. 

The  total  of  this  perishable  traflic,  46.513  carloads,  compares  with  the  other  heavy 
movements  eastbound  of — 

.  Cannedgoods 5, 098  carloads. 

f'oal 2, 472  carloads.  ' 

Lumber,  etc 3.5,  « I  carloads. 

Sugar,  etc 4^  1 4j<  carlcads. 

Wool,etc , 1,625  carloads. 

The  relative  importance  of  this  special -equipment  business  is  as  striking  therefore  on 
the  Union  Pacific  as  on  either  of  the  other  two  roads  above  mentioned.  This  is  all 
carload  traffic,  and  much  of  it  moves  in  solid  trainloads.  especially  fruit  and  vegetables, 
more  so  at  Ogden  than  at  Council  Bluffs.  A^i  vtic  goods,  all  imported,  moved  through 
Council  Bluffs  eastbound  in  192  )  to  the  am  >  i  it  of  517  carloids.  Of  export  goods,  prac- 
tically all  cotton,  1,917  carloads  m  js-ed  westbound  in  1920.  Solid  trainloads  west- 
bound are  miinly  confined  to  automj'jiles  and  steel  products.  Of  the  former  14,463 
and  of  the  latter  5,332  carloids  were  handled  westbound.  Summarily,  therefore,  the 
evidence  still  further  points  to  the  importance  of  the  carload  traffic  and  particularly 
of  the  carload  traffic  handled  by  special  equipment.  Based  upon  the  movement  of 
perishable  products,  the  operating  relationship  of  the  Union  Pacific  is  certainly  closer 
to  the  southern  group  of  roads  than  to  any  of  the  carriers  which  lie  farther  north. 

The  Union  Pacific  Railroad  is  the  key  log  to  the  transcontinental  jam— it  is  the 
clue  to  the  p'ot.  It  is  at  once  th  »  old-^n  and  th  >  shortest,  logically  the  most  perfect 
and  financially  the  strongest,  among  all  of  the  transcontinental  stems.  Not  only 
does  it  antedate  by  many  years  the  opening  of  any  other  Pacific  coast  rail  route, 
because,  naturally  enough,  of  its  directness  and  physical  inevitability,  but  it  was  * 
also  the  first  to  receive  the  official  sanction  and  financial  support  of  the  federal  gov- 

63I.<\C. 


ernment.  Inspection  of  map  14  throws  into  strong  relief  the  superiority,  geographi- 
cally, of  this  route  over  any  of  the  others  which  penetrate  to  the  coast,  either  by  the 
northern  or  the  southern  gateways.  And  imtil  the  completion  of  the  Western  Pa- 
cific line  from  Ogden  (Salt  Lake  City)  westward,  the  Union  Pacific  was  a  veritable 
monopoly,  the  only  through  route  directly  to  San  Francisco.  Never,  indeed,  would 
it  have  been  put  through,  in  face  of  the  physical  obstacles  to  be  overcome,  without 
the  full  appreciation  of  its  significance  as  a  key  line,  a  bridge,  which,  despite  federal 
support,  actually  broke  down  \mtil  taken  in  hand  by  a  master  mind  in  the  late 
nineties.  The  present  situation  is  unique.  The  Union  Pacific  has  attained  an 
inordinate  strength  and  a  dominant  position,  as  practically  the  ofily  first-claas  direct 
through  route.  And  yet  there  is  available  for  competition  with  it  another  new 
bridge  line,  the  Western  Pacific,  which,  while  physically  prepared  to  fimction, 
has  broken  down  because  of  the  lack  of  interchange,  connection,  and  support  at 
both  ends.  The  first  essential  choice  to  be  made  therefore  is  of  such  a  meiiger  for 
the  Western  Pacific — and  with  it  also,  of  course,  the  Denver  &  Rio  Grande — as  shall 
enable  them  to  be  matched  against  this  dominant  key  Hne,  the  Union  Pacific  Rail- 
road. And  as  will  shortly  appear,  by  the  Union  Pacific  is  meant  also  the  through 
route  comprising  both  the  Union  Pacific  and  the  Central  Pacific  as  well  (page  565  infra) . 
The  new  competition  to  be  provided  must  face  not  only  a  perfection  of  operating 
facilities  but  a  strength  of  financial  resources  which  is  almost  without  parallel.  The 
financial  status  of  the  Union  Pacific  in  1917  is  of  an  investment  account  per  mile 
of  line  of  $76,153  and  a  net  operating  income  of  $4,805  per  mile  of  line.  The  result 
thereof  is  a  return  of  6.42  per  cent  upon  what,  by  comparison  with  other  roads 
and  in  the  light  of  the  physical  circumstances,  does  not  appear  to  be  an  inordinate 
valuation  of  the  property.  Yet  this  is  not  the  whole  story.  Behind  the  Union 
Pacific  stands  its  imposing  array  of  investments,  yielding  an  income  from  interest 
and  dividends  alone  in  1920  equal  to  80  per  cent  of  its  own  fixed  charges.  These 
investments  are  in  part  the  result  of  thrift,  and  masterly  management  and  in  part 
the  result  of  bold  and  successful  speculation.  Regardless  of  source,  however,  the 
fact  remains  that  to  successfully  ri^al  the  Union  Pacific  will  call  for  an  array  of 
operating  and  financial  resources  which  it  will  be  extremely  troublesome  to  find. 

The  difficulty  of  matching  the  Union  Pacific  by  a  rival  direct  route  is  not  confined 
alone  to  the  carriage  of  the  burden  of  the  Western  Pacific.  This  bridge  line  is  pivotal 
to  the  situation.  It  is  manifestly  a  precarious  bridge,  with  absolutely  no  friendly 
footing  at  the  western  bridgehead.  But  that  is  not  all.  The  Denver  &  Rio  Grande 
is  almost  equally  a  bridge  line,  essential  to  the  constitution  of  any  direct  through 
route  by  way  of  Salt  I^ake  City.  It  also  is  in  a  pathetic  and  parlous  state.  Even 
before  the  present  general  breakdown,  it  had  gone  to  pieces  and  is  now  undergoing 
reorganization.  It  has  within  itself  a  great  network  of  branch  and  feeder  lines, 
many  of  them  narrow  gauge,  with  very  light  traffic.  But  their  continued  opera- 
tion is  essential  to  the  population  of  a  great  state.  WTiere  shall  strength  be  found 
adequate  to  carry  this  appalUng  array  of  liabiUties,  able  also  through  its  interchange 
and  support  to  transform  these  liabilities  into  a  national  asset  for  the  United  States? 
And  where,  also,  may  sufficient  credit  be  found  to  carry  through  the  enterprise  of 
providing  the  Denver  &  Rio  Grande  with  a  low-grade  gateway  through  the  Rocky 
Mountains,  the  last  essential  for  an  effective  competitive  direct  through  route  to 
San  Francisco? 

There  are  but  two  railroads  in  western  territory  which  by  reason  of  their  geographi- 
cal location,  their  traffic  interchange,  and  their  inherent  financial  strength  are  ade- 
quate to  undertake  the  effective  utilization  and  development  of  the  Western  Pacific- 
Denver  &  Rio  Grande  bridge.  The  first  of  these  is  the  Chicago.  Burlington  &  Quincy ; 
the  other  is  the  Santa  Fe.  As  for  the  former,  it  is  easily  first  among  the  granger 
properties.    Map  16  shows  its  geographical  location.    A  comparison  of  its  layout 

63 1.  C.  C. 


^Utoi 


562 


INTERSTATE   COMMERCE   COMMISSION    REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


563 


i'fri 


with  that  of  its  neighbors  discloees,  particularly,  its  close-knit  compactness,  entirely 
within  the  richest  territory  in  the  heart  of  the  United  States.  Unlike  the  Rock 
Island,  it  does  not  sprawl  all  over  the  map.  Unlike  the  Chicago  &  North  Western, 
it  does  not  divide  its  energies  between  extension  dne  west  from  Chicago  and  wide 
ramification  frwn  Chicago  north.  Over  a  series  of  parallel  lines  closely  bound  in 
with  one  another,  the  BurUngton  runs  directly  west  to  the  base  of  the  mountains 
both  at  Denver  and  at  Cheyenne.  It  is  self-sufficient,  having  amply  strengthened 
itself  by  the  provision  of  coal  hues  the  entire  length  of  Illinois.  These  feeders  afford 
an  ample  coal  supply  for  company  use  as  well  as  for  fuel  for  the  western  country. 
Furthermore,  the  resources  of  the  Burlington  have  been  carefully  husbanded  through 
the  continued  reinvestment  of  surplus  earnings  above  a  reasonable  dividend  rate, 
until  by  the  close  of  1919  its  corporate  surplus  amounted  to  $241 ,000,000.  The  details 
concerning  its  property  and  capitalization  are  to  be  found  in  the  record  of  the  recent 
application  to  capitalize  its  surplus.  The  financial  strength  revealed  in  these  pro- 
ceedings before  the  Interstate  Commerce  Commission  finds  no  counterpart  elsewhere 
among  American  railroads  except  in  the  statements  of  the  Union  Pacific.  The 
Union  Pacific  possesses  an  enormous  reservoir  of  investment  in  outside  properties. 
The  resources  of  the  Burlington  are  to  be  found  in  its  own  reserved  earnings.  It 
is  the  accumulation  of  these  revenues,  especially  through  recent  years — $70,000,000 
added  to  the  suplus  during  the  last  five  and  one-half  years,  for  example — which 
constitutes  the  foundation  for  the  belief  that  an  earning  power  is  inherent  in  the 
Biu-hngton  which  can  be  well  extended  for  the  support  of  another  transcontinental 
bridge  line.  Add  to  this  the  fact  that  the  Biu"lington  road  is  unquestionably  first 
among  the  six  roads,  already  described,  which  enter  Denver  from  the  east,  and  the 
strength  of  its  claim  to  priority  is  well-nigh  estabUshed. 

But  not  even  the  Burlington  with  all  its  inherent  strength  could  be  intrusted  to 
carry  the  Western  Pacific-Denver  &  Rio  Grande  bridge  line  alone.    The  handicap 
is  bound  to  be  enormous  at  the  western  end,  without  abundant  local  branches  or  feed- 
ers.   The  main  source  of  Western  Pacific  traffic  in  CaUfomia  is  at  San  Francisco,  the 
one  point  where  water  competition  is  always  bound  to  be  white  hot.    And  then  again 
the  cost  of  developing  the  new  gateway  west  of  Denver,  soon  to  be  outlined  in  detail, 
will  be  enormous.    Large  sums  must  also  be  spent  upon  the  Denver  &  Rio  Grande  to 
effect  its  own  rehabilitation.    Evidently  the  Burlington  must  be  still  further  strength- 
ened by  some  alliance  with  another  strong  railroad.    The  direction  in  which  this  alU- 
ance  must  be  sought  is  immediately  disclosed  upon  examination  of  map  16  by  the  twa 
BurUngton  extensions  to  the  northwest,  to  meet  the  Northern  Pacific  near  Billings, 
Mont.    The  nature  of  the  traffic  interchanged  over  these  lines  will  shortly  be  analyzed ; 
but  in  the  meantime  it  will  suffice  to  call  attention  to  the  physical  contacts  e\inced  by 
the  map.    All  the  relationships  which  oiu*  subsequent  examination  reveals,  point  to- 
the  Northern  Pacific  Railroad  as  the  most  obvious  side  partner  with  which  to  undertake 
a  difficult  joint  enterprise,  the  support  of  the  Western  Pacific  bridge  line.    There  is  yet 
another  reason  for  some  such  alliance  between  the  Burlington  and  one  of  the  northern 
transcontinental  lines — the  Northern  Pacific  or  some  other.    That  will  be  considered 
in  connection  with  the  twin  cities'  affairs.    It  will  there  be  shown  that  an  effective 
counterpart  for  the  Union  Pacific  can  be  produced  only  by,  some  such  alliance  between 
a  middle  transcontinental  road  and  one  lying  in  the  north.    From  these  two  distinct 
points  of  view,  then,  comes  corroboration  of  the  opinion  that  the  Burlington  must  add 
to  its  strength  and  traffic  resources  by  drawing  upon  this  northern  region,  if  it  is 
successfully  to  undertake  to  match  up  with  the  Union  Pacific.    And  of  these  northern 
properties,  as  will  be  established  in  due  time,  the  Northern  Pacific  appears  to  be  the 
one  to  select. 

The  second  choice  for  a  through  system  as  a  counterpart  to  the  Union  Pacific  is  the 
Atchison,  Topeka  &  Santa  Fe.    Its  admirable  and  effective  layout  will  be  somewhat 

63 1.  C.  C. 


minutely  described  in  due  time.    The  geographical  location  is  shown  on  map  22,  to- 
gether with  the  relationship  to  the  Denver  &  Rio  Grande  and  the  Western  Pacific. 
Inspection  of  this  map  immediately  brings  out  the  interdependence  between  the  three. 
The  through  route  from  Chicago  to  San  Francisco  would  not  be  as  direct  as  by  the  Bur- 
lington line,  shown  on  map  16,  particularly  to  Denver.    Denver,  in  fact,  lies  well  to 
the  north  of  Pueblo  and  it  is  by  way  of  Denver  that  the  new  gateway  must  be  ap- 
proached.   The  proposal  nevertheless  embodies  certain  significant  advantages.    All 
the  necessary  financial  strength  is  there,  and  this  is  certainly  essential.    But  the  plan 
commends  itself  especially  on  operating  and  traffic  grounds.    The  previous  analysis  of 
transcontinental  business  has  brought  out  the  high  proportion  of  traffic  which  moves 
from  California  in  refrigerator  cars  or  other  special  equipment,  not  less  than  20  per  cent 
in  fact  of  the  tonnage  and  earnings  of  staple  commodities.    This  equipment  represents 
a  large  investment  which  ought  to  be  made  productive  by  being  used  throughout  the 
year.    The  immense  tonnage  of  fresh  fruits  and  vegetables  out  of  California  consists  in 
the  main  of  citrus  fruits  in  the  early  part  of  the  year  and  the  deciduous  fndts  later  on. 
The  utilization  of  this  special  equipment  would  be  much  more  effective,  it  is  alleged^ 
were  the  Ogden  gateways  to  be  operated  under  the  same  management  as  the  Arizona 
gateways.    The  same  cars  could  be  moved  by  the  southern  route  during  the  cold 
season  and  be  chilled  by  ventilation  over  the  Ogden  route  with  the  advent  of  warm 
weather.    This  advantage  was  contemplated  and  in  part  realized  under  the  Haniman 
regime  as  well  as  under  the  federal  Railroad  Administration,  on  the  Union  Pacific. 
There  can  be  no  question  of  a  natural  affiliation  in  this  regard  between  the  middle 
routes  via  Ogden  and  those  which  traverse  New  Mexico  and  Arizona.    Nor  is  this  all. 
The  location  of  the  Denver  &  Rio  Grande  is  such,  and  the  Santa  Fe  so  approaches  it^ 
that  this  property  to  the  Santa  Fe  would  be  a  feeder,  more  than  a  mere  bridge.    This 
reason  alone,  it  is  quite  clear,  was  the  reason  for  a  long  persistent  interest  in  Rio  Grande 
affairs  on  the  part  of  the  Santa  Fe  directorate.     Note,  however,  that  it  was  not  inter- 
ested equally  in  the  Western  Pacific,  when  built,  as  the  Santa  Fe  already  had  a  first- 
class  through  line  of  its  own.     To  the  Burlington,  both  the  Denver  &  Rio  Grande  and 
the  Western  Pacific  would  be  merely  means  to  an  end.    To  the  Santa  Fe,  one  of  them — 
the  former — would  be  a  thing  in  itself.    For  these  reasons,  the  Santa  Fe  is  better  fitted 
to  assume  the  new  obligation  of  the  Western  Pacific  bridge  Une  than  the  Burlington. 
The  foregoing  advantages  of  Santa  Fe- Western  Pacific  merger  are  made  the  basis  of 
a  significant  comprehensive  plan  for  consoUdation  prepared  by  Mr.  Edward  Chambers, 
vice  president  and  traffic  manager  of  the  Santa  Fe  system.    A  subdivision  of  all  the 
railroad  mileage  west  of  the  Mississippi  into  five  great  systems,  is  proposed.    The 
first  consists  of  the  alliance  between  the  Santa  Fe,  the  Denver  &  Rio  Grande,  and  the 
Western  Pacific,  as  ab«ve  described,  thus  setting  up  a  key  line  to  match  against  the 
Union  Pacific.    The  superabundant  strength  of  the  Santa  Fe,  in  other  words,  is  de- 
voted to  carrying  the  load  of  the  unproductive  western  bridge  route.    This  project 
fulfills  in  effect  the  ultimate  plans  of  the  late  E.  P.  Ripley.    The  Santa  Fe  is  thus  pro- 
vided with  an  east-and-west  entry  into  CaUfomia,  both  at  San  Francisco  and  Los 
Angeles.    This  is  the  foundation  stone  of  the  Chambers  system.    The  second  group 
fulfills  the  original  plans  of  the  late  E.  H.  Haniman,  by  pro\iding  for  the  amalgamation 
of  the  Union  Pacific,  the  Southern  Pacific,  the  Rock  Island,  and  the  North  Western. 
This  system,  Ukewise,  it  will  be  observed,  provides  for  an  east-and-west  Une  both  into 
northern  CaUfornia  and  into  the  south  under  the  same  managranent.    The  same 
economies  in  the  use  of  special  equipment  would  be  afforded  as  for  the  proposed  Santa 
Fe  system.    The  third  group  under  the  Chambers'  plan  is  that  of  the  Hill  Unes  as  at 
present  related — the  BurUngton,  the  Northern  Pacific,  and  the  Great  Northern.    The 
natural  advantages  of  this  affiUation  are  too  obvious  to  require  description.    The 
fourth  system  Ues  in  the  southwest,  comprising  the  Frisco,  the  Missouri  Pacific,  the 
Katy ,  etc. ;  and  the  fifth  includes  all  the  rest,  notably  the  St.  Paul,  the  Soo.  the  Chicago 
Great  Western,  the  MinneapoUs  &  St.  Louis,  the  Chicago  &  Alton,  etc 

63 1.  C.  C. 


564 


INTERSTATE   i'OAlMERCK   TOMMISSH  N    P.:  P^HTS. 


CONSOLIDATION  OF  RAILBOADS. 


565 


I 


*♦ 


It  is  needless  to  specify  in  detail  certain  advantages  ot  the  Chambers  plan.  Its 
emphasis  upon  the  natural  interest  of  the  Santa  Fe  in  Colorado  arfairs;  more  effective 
management  of  the  refrigerator  business;  the  manner  in  which  the  Western  Pacific 
could  be  tied  in  with  the  California  feeders  of  the  Santa  Fe;  these  are  all  incontro- 
vertible. But  certain  radical  defects  attend  such  grouping.  The  first  is  the  hopeless 
weakness  of  the  fifth  system  built  upon  the  St.  Paul.  It  contains  nothing  but  "leav- 
ings, "  membra  disjecta.  One  can  not  conceivably  figure  out  a  return  on  an  invest- 
ment account  which  is  fairly  comparable  with  that  of  the  three  strongest  systems. 
Financial  ill-balance,  then,  is  the  first  defect.  The  Chambers  plan  is  in  the  second 
place  faulty,  in  that  it  violates  the  transportation  act  by  matching  the  three  strongest 
Hill  roads  in  the  northwest  against  the  very  weakest  one,  the  St.  Paul,  even  loading 
down  this  weakest  one,  as  above  indicated,  with  all  the  broken-down  carriers  out  of 
Chicago.  Thirdly,  although  the  act  requires  competition,  both  all  the  Hill  lines 
and  the  Harriman  lines  are  amalgamated.  Thus  the  federal  attack  upon  both  these 
combinations  is  entirely  ignored,  unless  the  Sherman  act  is  held  to  be  entirely  repealed 
as  to  railroads  by  the  transportation  act  of  1920.  This  defect  is  fundamental.  The 
next  objection  is  that  in  the  Southwestern-Gulf  region  most  of  the  now  outstanding 
competitors,  the  Missouri  Pacific,  the  Frisco,  and  the  Katy  lose  their  identity  within 
a  unified  system.  Competition  vanishes  over  night.  It  is  also  objected  that  the 
size  of  the  projXMed  Chambers  systems  is  inordinate.  Only  five  systems  for  all  the 
railroad  mileage  west  of  the  Mississippi  threatens  to  render  them  unwieldy,  and  as 
between  one  and  another  they  are  found  to  vary  too  greatly  in  extent,  ton  mileage, 
€tc.,  to  say  nothing  of  earning  power.  This  Chambers  plan  would  produce  systems 
for  exceeding  a  length  of  25,000  miles  of  line,  and  this  figure  is  held  by  the  most  compe- 
tent authority  to  be  too  large  for  really  effective  management.  California,  looking 
far  ahead,  is  surely  bound  to  be  adequate  to  provide  support  for  four  transcontinental 
bridges,  independent  of  one  another,  instead  of  limiting  the  number  to  three.  Or 
«ven,  as  under  the  (Chambers  plan,  merging  them  all  in  only  two  huge  competitive 
units. 

The  Chambers  plan,  built  upon  the  Santa  Fe,  being  held  in  general  inadequate, 
contains  nevertheless  a  suggestion  of  great  weight.  This,  as  we  have  seen,  is  that  the 
Santa  Fe  has  a  natural  interest  in  and  superabundant  strength  to  carry  the  weak  or 
bridge  line  of  the  Denver  &  Rio  Grande- Western  Pacific.  Yet  to  give  it  exclusive 
control  of  this  bridge  line  shuts  out  the  Burlington  from  San  Francisco,  at  least  until 
such  time  as  it  builds  through  to  the  coast,  and  the  very  purpose  of  the  act  is  to  dis- 
courage premature  duplication.  How  would  it  do  to  recognize  the  joint  interest 
of  these  two  powerful  companies,  and  to  require  them  in  unison  to  carry  the  load  of 
the  new  bridge  enterprise,  through  the  period  of  its  tender  yq^ith  at  least?  Or  why 
not  even  let  the  Central  Pacific  and  the  Western  Pacific,  as  under  federal  adminis- 
tration, be  operated  as  a  double-track  line  for  the  benefit  of  all  parties  concerned, 
the  Union  Pacific,  the  Burlington,  and  the  Santa  Fe?  The  objection  to  such  an 
arrangement  is  always  that  joint  and  equal  ownership,  even  of  a  short  line,  serves  to 
dwarf  initiative.  It  denatures,  so  to  speak,  the  local  officers  rendering  them  so  chary 
of  criticism  on  both  sides  that  they  take  the  line  of  least  resistance.  These  two  bridge 
lines  are  too  longperhaps  for  such  administration.  Perhaps  something  might  be  worked 
out  like  the  existing  cooperative  arrangement  between  Portland,  Oreg.,  and  Seattle. 
This  bridge  line  is  owned  by  the  Northern  Pacific;  but  full  trackage  rights  are  enjoyed 
both  by  the  Oregon  Short  Line  and  the  Great  Northern  Railway.  Each  of  the  three 
runs  both  its  own  engines  and  train  crews  over  the  line.  There  are  joint  station 
agents,  but  train  dispatchers  are  provided  by  the  Northern  Pacific  owner.  This 
joint  operation  is  said  to  be  as  effective  as  by  the  two  competing  lines  between  St. 
Paul  and  St.  Cloud,  Minn.  In  effect  the  entire  advantage.6f  double-track  operation 
i«  said  to  be  enjoyed  by  such  means,  and  except  for  local  business,  a  full  measure  of 
competition  would  continue  to  exist. 

63 1.  C.  C. 


There  are  other  objections,  however,  to  this  modification  of  the  Chambers  plan, 
certainly  unless  all  the  Harriman  roads  are  remerged,  and  this  we  assume  is  out  of 
the  queition  legally,  as  well  as  impossible  by  reason  of  size.  If,  however,  the  Southern 
Pacific  and  the  Central  Pacific  be  separated,  and  if  then  the  Central  Pacific,  for  the 
cogent  reasons  hereinafter  given,  be  transferred  to  the  Union  Pacific,  to  constitute 
it  a  through  key  line  to  the  coast,  the  impracticability  of  either  of  the  above-mentioned 
cooperative  plans  shines  forth.  How  manifestly  unfair  it  would  be  to  the  Southern 
Pacific,  for  example,  to  take  away  its  Central  Pacific  line  through  the  Ogden  gateway 
and  then  coincidently  to  confer  upon  its  great  rival,  the  Santa  Fe,  the  entire  or  even 
a  part  interest  in  the  other  Ogden  bridge  line.  Such  action  would  be  utterly  inde- 
fensible from  every  point  of  view.  This  objection  is  fundamental,  interlocking  as 
it  does  with  the  treatment  to  be  accorded  the  Central  Pacific.  It  should  be  clearly 
recognized  that  Santa  Fe  participation  in  the  Western  Pacific  is  utterly  incompatible 
with  a  merger  of  the  Central  Pacific  with  the  Union  Pacific.  If  the  latter  is  desirable, 
the  former  becomes  thereby  impossible.  Also,  as  a  general  consideration,  it  should 
be  borne  in  mind  that  the  Santa  Fe  line  into  southeafltem  Colorado  is  a  branch.  Its 
entrance  is  by  way  of  Pueblo,  and  the  Denver  &  Rio  Grande  gateway  back  to  Pueblo 
is  physically  impossible  for  the  stem  of  a  great  national  railroad.  The  James  Peak 
project,  soon  to  be  described,  providing  a  route  directly  through  Denver,  the  metropo- 
lis and  capital  of  the  state,  would  not  be  feasible  as  part  of  a  Santa  Fe  development. 
Physically,  therefore,  whether  in  part  or  in  whole,  the  Santa  Fe  merger  is  deemed 
impracticable. 

The  foregoing  discussion  of  the  relative  interest  of  the  Santa  Fe  and  the  Burlington 
in  an  Ogden  gateway  induces  a  somewhat  general  comparison  of  the  relationship 
which  subsists  between  the  middle  transcontinental  routes  and  those  lying  north  and 
south,  respectively.  For  the  Burlington,  with  either  the  Great  Northern  or  the  North- 
em  Pacific,  has  its  roots  embedded  primarily  in  the  north;  while  the  Santa  Fe  stands 
for  all  of  the  interests  and  affiliations  of  the  southern  lines.  It  may  be  enlightening, 
therefore,  to  compare  the  situation  north  and  south  in  a  large  way,  in  order  to  discover 
its  bearing  upon  the  choice  which  must  in  this  instant  case  be  made.  The  first  differ- 
ence between  the  Santa  Fe  and  the  Burlington-Northern  Pacific  (or  Great  Northern) 
as  respects  California  business  is  that  the  former  has  a  considerable  gathering  mileage 
the  length  of  California.  The  Burlington,  taking  the  Western  Pacific,  would  be 
quite  neutral  at  the  coast— as  neutral  as  the  Union  Pacific,  in  fact— reaching  San 
Francisco  by  means  of  the  Central  Pacific  alone.  There  is  the  same  objection  to  Santa 
Fe  control  of  the  Western  Pacific,  that  is  to  say,  of  two  gateways  into  California,  as 
there  is  to  the  single  control  by  the  Southern  Pacific  of  both  these  same  two  gateways. 
Seeking  to  produce  evenly  matched  conditions,  therefore,  the  Burlington- Western 
Pacific  is  much  more  closely  parallel  to  a  Union  Pacific-Central  Pacific  system  than 
any  combination  built  upon  the  Santa  Fe  could  possibly  be. 

The  physical  conformation  of  North  America  creates  a  wide  difference  between 
transcontinental  competitive  conditions,  north  and  south.  The  continent  narrows 
toward  the  equator,  distances  become  less  from  coast  to  coast,  and  the  Panama  Canal 
is  much  closer  to  and  potentially  more  important  to  the  Arizona  gateways  than  to 
any  of  the  others,  middle  or  north.  The  greater  intensity  of  this  competition  with 
the  Panama  Canal  through  the  southern  gateways  constitutes  in  fact  the  only  rightful 
claim  which  the  southern  lines  have  to  continued  control  of  the  north-and-south 
originating  roads  throughout  California.  Were  it  not  for  the  form  of  the  continent  and 
the  imminence  and  intensity  of  Panama  competition,  an  evenly  matched  rivalry 
would  not  obtain  were  so  much  of  the  local  north-and-south  California  mileage  to 
remain  in  the  control  of  the  southern  transcontinental  lines.  But  this  justifiable 
control  of  the  gathering  and  distributing  lines  in  California,  in  order  to  afford  com- 
pensation for  the  Panama  Canal  handicap,  in  turn  requires  that  the  Ogden  gateways 

63  I.  C.  C. 

63763—21 8 


4^ 


566 


INTERSTATE   COMMERCE   COA[ MISSION   REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


567 


remain  independent  of  southern  control.  It  is  just  as  essential  that  the  Western 
Pacific  be  administered  free  from  Santa  Fe  control,  as  that  the  Central  Pacific  be 
divorced  from  the  Southern  Pacific  Company.  Not  to  do  so  would  far  more  than 
counterbalance  the  Panama  handicap.  It  would  then  so  far  press  the  advantage 
against  the  other  railroad  connections  into  Ogden  from  the  east  as  to  jeopardize  their 
future. 

The  situation  is  so  rigid  that  it  may  be  otherwise  stated  in  the  form  of  a  syllogism: 
Given  equality  of  competing  strength  of  the  Santa  Fe  and  Southern  Pacific,  and 
ffiven  also  merger  of  the  Rock  Island  and  Southern  Pacific  systems,  then — 

(1)  If  the  Central  Pacific  remains  a  part  of  the  Southern  Pacific  system,  and  the  Santa 
Fe  and  the  Denver  &  Rio  Grande  (Western  Pacific)  are  combined,  'the  Union  Pacific 
is  not  only  completely  eliminated  from  San  Francisco,  hut  is  also  threatened  both  at  Los 
Angeles  and  Seattle.  For  it  will  stand  only  as  part  of  a  broken  direct  through  route, 
with  its  essential  connection  to  San  Francisco  controlled  by  a  competitor  (the  Southern 
Pacific)  having  one  complete  indirect  route  of  its  own  via  El  Paso,  and  another  direct 
one  almost  joined  up,  by  way  of  Ogden  (the  only  link  lacking,  with  Rock  Island 
entrance  to  Denver,  being  between  Ogden  and  that  point).  The  only  choice  under 
these  circumstances  to  save  the  Union  Pacific  from  being  pocketed  would  be  to  cut 
off  the  Denver  division  of  the  Rock  Island.    Or  else — 

(2)  If  the  Central  Pacific  be  transferred  from  the  Southern  to  the  Union  Padfic,  this  alter- 
native jeopardizes  the  Southern  Pacific  everywhere  in  California  by  withdrawing  its 
Central  Pacific  Ogden  link,  while  coincidently  adding  a  new  Ogden  link  to  its  deadly 
rival,  the  Santa  Fe,  creating  thereby  a  new  direct  through  line.  Either  way  you  treat 
the  Central  Pacific,  a  complete  upset  of  the  competitive  equilibrium  results.  The 
conclusion  is  inescapable  that  the  Burlington  rather  than  the  Santa  Fe  must  be 
charged  with  sponsorship  for  the  Denver  &  Rio  Grande  (Western  Pacific)  route. 

These  wearisome  general  considerations,  then,  all  go  to  fortify  the  opinion  that  a 
northern  and  not  a  southern  affiliation  for  both  of  the  Ogden  bridge  lines  will  tend 
most  effectively  to  produce  an  evenly  matched  rivalry  all  round.  In  brief,  the  con- 
clusion is  reached  that  the  Burlington  and  not  the  Santa  Fe  should  be  elected  as  the 
David  to  meet  the  Goliath  of  the  Union  Pacific  on  its  own  ground. 

The  situation  must  now  be  viewed  from  the  eastern  end.  Inasmuch  as  there  are 
only  three  transcontinental  roads  in  the  northern  group,  all  naturally  based  upon  the 
twin  cities,  there  can  not  possibly  be  more  than  three  northwestern  through  systems; 
and  the  express  terms  of  the  statute  as  to  competition  do  not  permit  less  than  two. 
But  the  choice  between  the  alternative,  two  or  three,  depends  in  part  upon  the  avail- 
able first-class  Chicago  connections,  suitable  for  the  stems  of  such  transcontinental 
systems.  There  are  only  four  of  these,  traceable  on  map  14.  Two  are  the  water-grade 
Mississippi  River  lines  of  the  Burlington,  on  the  left  bank,  and  the  St.  Paul,  on  the 
right  bank.  Then,  across  Wisconsin  there  is  the  Soo  line  (Minneapolis,  St.  Paul  & 
Sault  Ste.  Marie)  and  the  line  of  the  Chicago  &  North  Western  system  through  Madison. 
Another  route  across  Iowa,  possibly  also  deserving  consideration  as  a  connection 
between  St.  Paul  and  Chicago,  is  that  of  the  Chicago  Great  Western.  This  also  is 
dotted  upon  the  map.  And  the  Rock  Island  has  a  competitive  line,  but  it  is  so  much 
more  circuitous  that  it  may  well  be  ignored  in  this  connection  (See  table  on  page  574.) 
The  distances,  Chicago  to  the  twin  cities  (St.  Paul)  by  these  several  routes,  constitute 
one  factor  in  their  availability.    These  are  as  follows: 

Chicago  &  North  Western  via  Janesville 396. 1  miles. 

Chics^o  &  North  Western  via  Milwaukee 408. 9  mile?. 

Chicago,  Milwaukee  &  St.  Paul  via  Janesville 40S.8miles. 

Chicago,  Milwaukee  &  St.  Paul  via  Milwaukee 410     miles. 

Chicago  G  reat  Western 424. 7  miles. 

Chicago,  Burlington  &  Qnincy 430. 8  miles. 

Minneapolis,  St.  Paul  &  Sault  Ste.  Marie 450.7  miles. 

Chicago,  Rock  Island  <fe  Pacific 512     miles. 

63  I.  C.  C. 


But  of  equal  or  even  greater  weight  is,  of  course,  the  condition  of  the  properties  as  to 
double-tracking,  grades,  and  curvature,  and  equipment  with  signals,  grade  crossings, 
and  the  like.  The  choice  which  must  be  made  is  necessarily  based  upon  a  complex 
of  these  elements. 

Upon  the  basis  of  the  foregoing  facts,  then,  a  decision  as  between  two  or  three  inde- 
pendent competing  northwestern  systems  through  the  twin  cities  must  now  be  made. 
This  is  the  next  step  in  a  logical  analysis.  It  must  be  followed  by  an  appropriate 
selection  for  Chicago  connections  or  stems  from  among  the  six  available  lines,  as  above 
described.  Thus  there  are  two  independent  elements  in  the  problem,  each  of  which 
might  almost,  be  decisive.  But  of  the  two,  the  conditions  west  of  the  twin  cities  are 
more  conclusive  than  are  those  east  of  that  point.  After  deciding,  therefore,  as  be- 
tween two  or  three  lines  in  the  light  of  conditions  west,  it  will  be  in  order  to  apply  that 
judgment  to  the  conditions  which  obtain  between  St.  Paul  and  Chicago. 

Shall  the  three  through  lines  west  of  the  twin  cities,  then,  be  combined  into  two 
systems,  or  remain  independently  as  three?  At  present  the  Great  Northern  and  North- 
em  Pacific  are  allied  through  their  joint  ownership  of  the  Burlington.  The  choice  of 
two  systems  under  the  requirements  in  the  statute,  of  a  combination  of  weak  and 
strong  points  to  a  rearrangement  of  these  properties.  For,  to  leave  the  Great  Northern 
and  the  Northern  Pacific  together,  would  combine  two  strong  roads  against  the  St, 
Paul,  which  is  the  weakest  of  the  three.  The  only  possible  solution  therefore  under 
a  two-system  scheme  is  to  couple  with  the  St.  Paul  whichever  one  of  the  other  two 
is  the  more  complementary  to  it,  for  the  statute  also  directs  that  complementary 
rather  than  competitive  roads  shall,  wherever  possible,  be  put  together.  There  is 
another  aspect  of  the  two-system  plan  presented  by  the  situation  east  of  the  twin 
cities.  That  will  be  discussed  in  another  paragraph.  But  as  to  the  situation  west 
of  St.  Paul,  it  is  obvious  that  the  plan  for  two  northern  transcontinental  lines  calls 
for  determination  whether  the  Great  Northern  or  the  Northern  Pacific  is  the  better 
fitted  for  merger  with  the  St.  Paul.  This  again  involves  considerations  of  location, 
of  feeders,  of  coal  supply,  of  sources  of  revenue,  of  terminals,  and,  particularly,  to 
satisfy  the  statute,  of  the  preservation  of  competition  at  as  many  points  as  possible. 
This  choice  also  will  be  discussed  in  due  time. 

The  alternative  of  three  transcontinental  systems  west  of  the  twin  cities,  instead  of 
two,  rests  upon  two  general  considerations.  The  first  is  whether  three  lines  inde- 
pendently will  balance  up  as  to  competition  better  or  worse  than  an  arrangement  by 
which  two  of  them  are  allied ,  each  reenfordng  the  other.  This  is  a  question  of  earning 
power  and  of  finance.  The  second  consideration  has  to  do  with  geographical  location. 
The  plan  for  three  northwestern  transcontinental  lines  is  rejected  in  favor  of  two  sys- 
tems, upon  both  grounds  above  mentioned.  Subsequent  financial  analysis  clearly 
establishes  such  a  diversity  as  to  earning  power,  feeders,  and  general  conditions,  be- 
tween the  three  lines  west  of  St.  Paul,  that  a  much  better  balance  can  be  brought 
about  by  pitting  the  two  weaker  companies  against  the  Northern  Pacific  than  by  leav- 
ing all  three  of  them  to  compete  with  one  another.  Statutory  requirements,  in  other 
words,  as  to  combination  of  weak  and  strong  roads  while  still  preserving  competition, 
leads  to  this  conclusion.  And  also  upon  the  second  groimd,  of  insufficient  available 
connectioiis  of  uniform  standard  and  capacity,  between  St.  Paul  and  Chicago,  the 
same  conclusion  is  reached.  The  Chicago  Great  Western  is  held  at  present  to  be 
inadequate  as  a  stem  for  a  transcontinental  system;  and  no  other  stem  may  be  had, 
as  aforesaid,  unless  either  the  Chicago  &  North  Western  or  the  Canadian  Pacific  sys- 
tems be  bereft  of  their  backbones  in  Wisconsin.  Either  of  these  two  grounds,  it  is 
believed,  is  conclusive.  Nor  is  the  argument  weakened  by  the  discovery  of  a  dis- 
tinctly better  use  to  which  the  Chicago  Great  Western  can  be  put.  The  plan  pro- 
ceeds therefore  upon  the  basis  of  two  through  northwestern  transcontinental  systems. 
63 1.  C.  C. 


%«^ 


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INTERSTATE  COMMERCE  COMMISSION   REPORTS. 


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But  the  plan  for  two  northwestern  transcontinental  systems  instead  of  three  com- 
mends itself  on  other  more  general  grounds.  It  better  preserves  a  balance  of  power 
among  all  the  other  transcontinental  roads.  Not  separately,  alone,  may  these  north- 
em  lines  be  treated.  Their  competitive  relationship  to  the  middle  group  of  trans- 
continental systems,  via  Colorado,  must  also  be  considered.  This  compels  a  broader 
view  of  the  entire  transcontinental  layout.  It  subsequently  appears  that  for  decisive 
reasons  the  Union  Pacific  and  the  Chicago  &  North  Western  should  be  merged  in  a 
very  strong  combination,  running  due  west  from  Chicago,  and  no  other  relationship 
for  a  direct  eastern  stem  for  the  Union  Pacific  conforms  to  the  statute  as  to  preserva- 
tion of  existing  trade  routes.  But  this  arrangement  obviously  intertwines  the  north- 
western transcontinental  sector  of  the  United  States  with  the  middle  group  of  through 
lines.  The  only  way  to  avoid  it  would  be  to  dismember  the  Chicago  &  North  Western 
system  in  Wisconsin  by  segregation  of  its  Wisconsin  lines.  This  might  be  done  as 
above  mentioned,  in  order  to  procure  an  independent  third  high-grade  line  from 
Chicago  to  the  twin  cities  for  a  third  transcontinental  system.  But  this  alternative 
has  been  already  rejected  on  other  grounds.  Thus  the  Union  Pacific-Chicago  & 
North  Western  combination  is  left  in  possession  of  lines,  not  only  due  west  to  San 
Francisco,  but  up  into  the  territory  northwest  of  Chicago  as  far  as  the  head  of  Lake 
Superior.  This  system  also  penetrates  by  way  of  the  Oregon  Short  Line  into  the  far 
northwest,  in  Washington  and  Oregon  alike.  This  last  is  the  significant  point.  The 
Union  Pacific  middle-group  combination  competes  inevitably  both  at  San  Francisco 
and  at  Seattle.  And  the  same  would  be  true  were  the  St.  Paul,  possibly  as  herein- 
after discussed,  to  be  selected  to  pair  of!  with  the  Union  Pacific  instead  of  the  North 
Western.  It  is  the  strongest  single  combination  in  the  entire  western  field.  To 
balance  up  conditions,  it  is  imperative  that  an  equally  strong  and  an  equally  com- 
prehensive system  be  set  up  against  it,  haviiig  as  wide  a  range  on  the  Pacific  coast. 
The  only  way  to  accomplish  this  grand  strategy,  as  we  have  already  seen,  is  to  utilize 
the  Burlington  at  the  eastern  end  as  the  stem  for  lines  which  reach  both  California 
and  the  state  of  Washington.  That  is  another  logical  reason  for  the  particular  choice 
as  to  alliance  east  of  Colorado  with  the  Denver  &  Rio  Grande-Western  Pacific.  The 
Burlington  is  selected  among  the  other  roads  east  of  Denver  for  this  purpose,  not  only, 
as  will  subsequently  appear,  because  it  is  the  best  line  physically  but  also  because 
by  remaining  intact  as  a  system,  including  the  river  line  to  St.  Paul,  it  creates  a 
worthy  competitor  as  to  reach  and  power  with  the  powerful  Union  Pacific  group. 
Only  by  way  of  the  Burlington  and  the  Northern  Pacific,  the  two  strongest  roads 
through  St.  Paul,  is  Seattle  reached  by  a  line  able  to  cope  on  even  terms  with  the 
Oregon  Short  Line  (Union  Pacific  system).  And  coincidently,  as  has  already 
appeared,  the  Burlington  directly  west  is  best  able  to  support  and  perhaps  carry 
through  the  Western  Pacific  program  to  match  up  with  the  Union  Pacific  at  San 
Francisco. 

The  only  way,  seemingly,  to  avoid  such  interrelationship  of  the  combinations  due 
west  from  Chicago  with  those  through  the  twin  cities  to  the  northwest  would  be  to 
dismember  both  the  Burlington  and  the  Chicago  &  North  Western  systems.  Figura- 
tively speaking,  as  map  16  shows,  the  Burlington  lies  like  a  hand  with  the  fingers 
pointing  to  Denver  and  a  solitary  thumb  sticking  up  to  St.  Paul;  while  the  Chicago 
&  North  Western,  less  clearly,  perhaps,  reverses  this  situation  with  the  fingers  of  the 
hand  pointing  northwest  while  its  thumb  runs  to  Omaha.  To  separate  the  western 
from  the  northwestern  transcontinental  situation  would  involve  cutting  off  each  of 
these  thumbs  and  transferring  each  to  the  other  set  of  fingers.  The  thumb  of  the 
Burlington  to  the  twin  cities  could  be  built  into  a  second  transcontinental  system 
through  St.  Paul,  as  above  mentioned,  using  it  either  for.  the  Northern  Pacific  or  the 
Great  Northern;  and  the  North  Western  line  to  St.  Paul  could  be  utilized  as  a  stem 
for  the  remaining  third  transcontinental  line  via  the  same  gateway.    Then  the  thumb 

63 1.  C.  C. 


CONSOLIDATION  OF  RAILROADS. 


569 


of  the  North  Western  to  Omaha  could  likewise  be  excised  to  create  a  Union  Pacific 
route  due  west  from  Chicago,  dissociated  from  any  transcontinental  line  or  other 
local  lines  in  Minnesota.  But  such  disruption  of  corporate,  operating,  and  traffic 
conditions  is  naturally  to  be  considered  only  as  a  last  resort.  And  even  if  it  were 
done  it  would  not  dissociate  transcontinental  competition  between  the  middle  and 
northern  groups,  for  the  Oregon  Short  Line  would  still  hold  the  middle  group  in 
the  far  northwest;  although  the  northern  group  would  be  effectively  cut  out  of  par- 
ticipation by  rail  in  traffic  from  California.  The  situation,  in  other  words,  would  be 
quite  out  of  equilibrium. 

The  simplest  solution  for  the  northwest  therefore,  apparently  forced  by  the  express 
terms  of  the  statute  and  in  order  to  minimize  existing  corporate  disruption,  is  to  elect 
the  alternative  of  two  rather  than  three  transcontinental  systems  through  the  twin 
cities.  And  this  choice,  as  already  manifested,  involves  a  divorce  of  the  Great 
Northern  from  the  Northern  Pacific;  and  the  alliance  of  one  or  the  other,  whichever 
is  the  more  complementary  thereto,  to  the  St.  Paul  system.  This  might  conceivably 
strengthen  the  Chicago,  Milwaukee  &  St.  Paul,  as  contemplated  by  the  statute,  both 
for  operation  and  traffic,  so  that  there  would  result  throughout  the  northwestern 
sector  of  the  country  competition  on  more  nearly  equal  terms  between  two  first-class 
systems;  and,  coincidently,  as  between  the  northwestern  and  the  middle  group  of 
transcontinental  lines,  it  would  also  be  productive  of  more  evenly  balanced  rivalry. 

The  primary  advantage  of  a  possible  combination  of  the  St.  Paul  and  the  Norli- 
ern  Pacific  railroads  is  disclosed  by  consideration  of  map  17-A.  The  former  is  desig- 
nated thereon  by  a  light  solid  line  and  the  latter  by  a  light  line  with  short  trans- 
verse crosses.  The  two  roads  practically  parallel  one  another  for  almost  a  thousand 
miles  across  Montana,  Idaho,  and  Washington.  For  600  miles  west  of  Butte  the 
same  principal  towns  are  reached  by  each  line.  The  economy  of  joint  operation 
might  be  very  great,  transforming  two  single-track  lines  into  a  double-track  prop- 
erty. The  carrying  capacity  of  the  present  rails  would  practically  be  doubled, 
without  the  expense  ordinarily  attendant  upon  such  increase  of  facilities.  About 
400  miles  of  the  St.  Paul  line  is  already  electrified,  on  which  a  much  larger  volume 
of  transportation  would  be  possible  for  the  benefit  of  the  two  companies.  It  is  al- 
leged, in  fact,  that  it  alone  could  handle  all  the  business  of  the  two.  The  St.  Paul 
line  is  90  miles  shorter  than  the  Northern  Pacific  between  Spokane  and  Seattle; 
and  the  St.  Paul  crossing  of  the  Cascade  Range  is  electrically  operated.  The  out- 
standing weakness  of  electrification  is  the  constant  overhead  and  wastage,  with  only 
occasional  utilization  of  power,  depending  upon  the  density  of  traffic.  Traffic  den- 
sity, in  other  words,  is  imperative  for  the  full  realization  of  the  economies  of  elec- 
trical transmission;  and  unified  operation  of  these  two  roads  invites  just  such  concen- 
tration. Furthermore  the  two  lines  supplement  one  another  as  to  feeders.  This 
also  appears  from  inspection  of  the  map  17-A.  The  Northern  Pacific  is  amply  pro- 
vided with  branches  at  the  western  end,  just  where  the  St.  Paul  is  notoriously  weak. 
And,  conversely,  the  wealth  of  branches  throughout  the  territory  northwest  of  Chi- 
cago admirably  supplements  the  Northern  Pacific  in  reaching  traffic-originating 
territory.  All  these  considerations,  of  economical  operation,  conservation  of  invest- 
ment for  future  use,  and  grouping  as  to  branches  and  feeders,  commend  this  union. 
On  financial  grounds  it  is  attractive  to  the  St.  Paul  as  extending  the  strength  of  an 
old  established  property  in  its  time  of  need,  it  being  avowedly  the  weakest  of  the 
three  northern  lines.  Historically,  it  is  not  without  interest  to  not^  the  divergent 
views  of  the  financial  leaders  during  the  last  great  period  of  txanscpntinentai  con- 
solidation 20  years  ago.  James  J.  Hill  and  J.  P.  Morgan  were  alike  interested  in 
securing  a  Chicago  connection  for  the  Great  Northern  and  the  Northern  Pacific. 
But  Hill  greatly  preferred  the  Burlington  for  that  purpose.  Morgan  wanted  the  St. 
Paul.    Hill  finally  deferred  to  Moi^gan;  the  St.  Paul  was  approached;  its  dominant 

63 1.  C.  C. 


'  I 


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INTERSTATE   COMMERCE   COMMISSION  REPORTS. 


stockholders  refused  to  part  with  it;  and  Hill,  therefore,  in  the  end  had  his  way.  The 
Burlington  was  purchased  jointly  by  the  other  two  roads,  the  arrangement  persist- 
ing to  this  day.  Now  it  becomes  a  question  to  consider  the  propriety  of  disrupting 
this  combination;  and  in  that  event,  of  effecting  a  better  rearrangement  of  the  con- 
stituent properties. 

The  union  of  the  Northern  Pacific  and  the  St.  Paul  is  open,  however,  to  one  funda- 
mental objection.  It  runs  directly  counter  to  the  terms  of  the  statute  as  to  the  pre- 
servation of  competition.  At  present  most  of  the  stations  for  a  number  of  hundred 
miles  are  common  points.  This  is  as  true  of  all  the  local  stations  as  it  is  of  Butte  and 
Spokane.  In  the  words  of  a  Northern  Pacific  official,  the  St.  Paul  literally  "nms 
through  our  bowels."  To  unite  these  roads,  then,  would  substitute  monopoly  for 
the  existing  competition.  This  is  a  serious  matter  from  the  standpoint  of  public 
opinion,  however  it  may  balance  up  in  the  view  of  experts  on  the  ground  of  operat- 
ing economy.  Furthermore,  these  two  properties  lie  so  closely  together  that  the 
geographical  scop>e  of  the  joint  system  is  relatively  much  narrower  than  that  which 
would  result  from  other  groupings.  It  has  been  calculated  roughly  tliat  the  St. 
Paul  west  of  Wisconsin,  combined  with  the  Northern  Pacific,  would  serve  an  area  of 
630,000  square  miles.  Combined  with  the  Great  Northern,  owing  to  the  wider  sep- 
aration between  the  main  stems,  this  area  would  amount  to  about  730,000  square 
miles,  about  16  per  cent  more  territory.  But  as  against  this,  the  territory  of  the 
Northern  Pa(»ific  is  more  fully  developed  than  that  of  the  Great  Northern,  because 
of  its  longer  life.  In  either  event,  it  is  believed  that  the  objection  springing  from  the 
almost  complete  obliteration  of  competition  by  merger  is  conclusive  in  and  of  it- 
self. 

Almost  ever>'  advantage  except  that  of  economy  and  efficiency  from  joint  opera- 
tion attaches  to  a  consolidation  of  the  Chicago,  Milwaukee  &  St.  Paul  with  the  Great 
Northern  Railway.  The  two  lines  instead  of  being  locally  competitive,  and  keenly 
so,  are  in  several  ways  supplementary.  This  is  made  clear  by  map  17.  The  two 
main  stems  are  so  far  apart  that  they  give  a  wide  comprehensiveness  to  the  system 
as  a  whole.  There  are  very  few  points  locally  except  Great  Falls  and  Lewiston, 
Mont.,  where  the  two  roads  meet;  although  of  course,  on  tlirough  business  at  Spokane, 
Seattle,  etc.,  the  condition  is  practically  the  same  as  with  the  Northern  Pacific.  As 
to  branches  and  feeders,  the  Great  Northern  is  materially  more  developed  at  the  west- 
ern end  than  the  St.  Paul,  and  its  numerous  feeders  through  North  Dakota  add  to, 
rather  than  duplicate,  the  St.  Paul  lines.  The  lines  and  terminals  of  the  Great 
Northern  at  Duluth  and  Superior  appreciably  strengthen  the  slight  connection 
through  trackage  which  the  St.  Paul  now  has  with  those  important  points.  And 
this  merger  has  certain  decided  advantages  as  to  terminals  over  the  St.  Paul-North- 
ern Pacific  combination.  Both  the  Great  Northern  passenger  station  at  Minneapolis 
and  the  joint  line  between  Minneapolis  and  St.  Paul  could  be  directly  used,  avoid- 
ing a  back-up  lor  passenger  trains  and  very  expensive  track-elevation  proposals. 

Financial  considerations  of  weight  also  favor  grouping  the  Great  Northern  rather 
than  the  Northern  Pacific  with  the  St.  Paul.  The  St.  Paul  for  the  year  1917  earned 
(in  operating  income)  only  4.43  per  cent  on  its  investment  (of.  exhibit  6).  The 
Northern  Pacific  earned  6.08  per  cent,  as  against  the  Great  Northern  with  7.09  per 
cent.  The  same  results  comparatively  are  disclosed  by  average  annual  results  for 
a  10-year  period.  The  St.  Paul  for  1910-1919  inclusive  had  a  surplus  above  dividends 
of  only  $1,062,678;  the  Northern  Pacific  $5,148,233;  while  the  Great  Northern  produced 
a  surplus  of  $6,039,693.  The  strength  of  the  Great  Northern,  comparatively,  consists 
of  its  low  proportion  of  funded  debt  to  total  capitalization.  This  appears  in  the 
following  table  of  funded  debt  outstanding  and  ratio  to  total  capitalization: 

63I.C.O. 


CONSOLIDATION  OF  RAILROADS. 


571 


Year. 

Chicago,  Milwaukee 
St.  Paul. 

Great  Northern. 

Northern  Pacific. 

Chicago,  Burlington 
&  Quincy. 

Debt. 

Ratio. 

Debt. 

Ratio. 

Debt. 

Ratio. 

Debt. 

Ratio. 

1910 

$147,807,600 
192,860,655 
227,599,155 
299,554,755 
331,227,455 
356,146,655 
356,157,255 
380,833,255 
381,961,255 
379,255,255 

Per  a. 

38.97 
45.44 
49.53 
56.39 
58.75 
6a  42 
60.45 
62.04 
62.07 
61.92 

$109,385,900 
144,441,909 
143,757,909 
143,655,900 
143,478,900 
143,391,909 
143,275,758 
163,140,515 
163,051,515 
162,910,515 
• 

Perd. 
34.3 
40.8 
40.6 
40.6 
38.4 
36.5 
36.5 
39.5 
39.5 
39.5 

$190,952,500 
190,325,500 
191,365,500 
192,352,500 
194,737,500 
206,479,000 
205,922,000 
203,474,000 
202,713,000 
202,108,000 

Perd. 
43.5 
43.4 
43.5 
43.7 
44 
45.5 
45.4 
45.1 
45 
44.9 

$196,787,300 
200,459,800 
199,196,200 
197,245,400 
203,222,900 
181,690,000 
179, 858, 500 
174,972,200 
174,599,300 
168,050,000 

Peret. 
63.9 

1911 

64.4 

1912 

64.2 

1913 

64 

1914 

64.7 

1915 

62.1 

1916 

61.9 

1917 

61.2 

1918 

61  2 

1919 

60.2 

Again  the  Great  Northern  heads  the  list  with  only  39.5  per  cent  of  funded  debt  to 
total  capitalization  for  1919.  This  compares  with  44.9  per  cent  for  the  Northern 
Pacific  and  61.92  per  cent  for  the  St.  Paul.  Assuming  that  these  companies  are  not 
to  require  financial  reorganization,  but  would  be  merged  by  exchange  of  securities 
as  they  stand,  it  is  obvious  that  the  best  balance  as  to  margin  of  safety  of  earnings 
above  fixed  chai^ges,  would  be  produced  by  combining  the  road  with  the  lowest 
proportion  of  funded  debt  (the  Great  Northern)  with  the  one  having  the  highest 
proportion  (the  St.  Paul);  both  set  off  against  the  Northern  Pacific,  which  occupies 
a  mean  position  in  this  regard.  Furthermore,  viewed  over  a  term  of  years,  the  fixed 
charges  proportionately  have  been  rising  most  rapidly  on  the  St.  Paul,  and  appre- 
ciably so  on  the  Northern  Pacific,  while  on  the  Great  Northern  they  have  remained 
constant. 

The  fundamental  test  of  financial  stability,  namely,  margin  of  safety  above  fixed 
charges,  commends  the  Great  Northern-St.  Paul  combination.  The  same  result  is 
disclosed  by  the  figures  as  to  capital  stock  and  total  capitalization  per  mile  of  line. 
This,  again,  appears  by  the  accompanying  tables  as  to  capital  structure.    A  combina- 


Items. 


Capital  structure. 

Capital  stock 

Funded  debt 

Total  capital 

Capital  stock  per  mile  of  road 

Funded  debt  per  mile  of  road 

Total  capital  per  mile  of  road 

Property  investment  account 

Road  and  equipment  less  depreciation 

Improvements  on  leased  lines 

Investment  in  affiliated  companies 

Other  investments 

Total  investment 

Income  account. 

Standard  return 

Other  income 

Gross  income 

Fixed  charges. ..'. 

Net  income 

Dividends  ^ 

Balance 


Chicago,  Mil- 
waukee &  St. 
Paul  and  Great 
Northern 
(18,400  miles 
operated). 


$482,728,950 
542,165,770 

1,024,894,719 

26,220 
29,480 

55,700 


1,001,052,180 

5,157,465 

126,679,491 

32,980,702 

1,165,860,828 


56,632,792 
6,069,419 
62,702.211 
29,319,  <  42 
33,382,469 
25,572,095 

7,810,374 


Chicago,  Mil- 
waukee &  St. 
Paul  and  Nor, 
Pacific 
(16,772  miles 
operated). 


$481,251,800 
581,363,255 

1,062,615,054 

28,700 
34,630 

62,300 

1,088,085,964 
11,172,341 
77,396,237 
47,918,431 

1,224,572,973 


58,035,511 
6,610,572 
64,645,783 
31,736,202 
32,909,581 
25,469,206 

7,440,375 


^  Annual  dividends  at  the  rate  of  7  per  cent  on  St.  Paul  preferred  stock  are  herein  included. 
63I.C.C. 


l^ 


672 


INTERSTATE  COMMERCE  COMMISSION  REPORTS. 


tion  of  the  St.  Paul  and  the  Great  Northern  yields  total  capitalization  per  mile  of 
road  of  155,700,  as  against  the  figure  of  $62,300  for  the  St.  Paul  combination  with  the 
Northern  Pacific.  But  of  course  this  comparison  is  hardly  fair;  because  the  Northern 
Pacific  in  turn  is  to  be  merged  with  the  Burlington,  according  to  this  plan.  Com- 
parison should  be  made  therefore  with  the  final  combination.  This  is  impossible 
until  a  decision  is  had  upon  the  pending  application  of  the  Burlington  to  capitalize 
its  surplus.  But  it  is  believed  that  on  the  whole  the  conclusions  as  above  stated 
would  be  borne  out  by  more  detailed  and  careful  computations. 


m 


Percent  of  Capital  Stock  and  Funded  Debt 
of  total  capitalization 


CMft  STP-©TNOR. 
SYSTEM 


c&a  Q.-NOR.n%c 

SYSTEM 


« 

n 

ti                                         49 

«J.       • 

V» 

SX3% 

tctik 

AA 

t 

•a 

D 


CAPITAL  STOCK 


PUNOED  DEBT" 


M    CBJtO.  Jfc45  m*  wttMti  in  f\>na«<l  Debt  of  et.N«r.  and  Nor.Pbe. 


63I.C.G. 


CONSOLIDATION  OF  RAILROADS. 


673 


The  St.  Paul -Great  Northern  system  needs  certain  additions  in  order  to  balance 
competition  throughout  the  northwest  more  fairly  with  the  very  powerful  Northern 
Pacific-Burlington  combination.  Map  17  shows  the  geographical  location.  First 
and  foremost,  it  must  be  protected  as  to  access  into  Portland,  Oreg.  The  Spokane, 
Portland  &  Seattle  line  down  the  north  bank  of  the  Colmnbia  River  is  at  present 
owned  jointly  by  the  Northern  Pacific  and  the  Great  Northern.  This  admits  the 
St.  Paul  automatically  imder  the  proposed  merger  to  Portland  territory.  Possibly 
the  Northern  Pacific  might  withdraw  its  investment  from  the  Spokane,  Portland  & 
Seattle  entirely,  in  favor  of  the  St.  Paul,  in  so  far  at  least  as  it  has  a  parallel  line  of 
its  own.  But  upon  this  point  decision  may  be  withheld.  And  the  continuance  of 
the  joint  line  owned  by  the  Northern  Pacific  between  Seattle  and  Portland  would 
assure  competition  south  of  Seattle.  North  of  Seattle,  the  alliance  admits  the  St. 
Paul  over  the  Great  Northern  lines  into  Vancouver,  a  point  from  which  it  has  here- 
tofore been  excluded.  Similarly  the  rights  of  the  Great  Northern  in  the  Deschutes 
River  canyon  and  down  the  Willamette  Valley  should  be  assured  equally  with  the 
St.  Paul .  Thus,  it  appears  that  each  company  would  profit  greatly  by  the  partnership 
and  would  be  able  to  cope  more  successfully  with  the  old  and  firmly  intrenched 
Northern  Pacific  line  in  this  district. 

At  the  eastern  end  the  St.  Paul-Great  Northern  combination  requires  modification 
only  in  detail .  An  element  of  strength  is  the  duplicate  line  of  the  St.  Paul  to  Chicago 
by  way  of  La  Crosse  and  Savanna,  111.  The  water-grade  line,  only  14  miles  longer 
than  via  Milwaukee,  greatly  increases  its  capacity  to  handle  the  business  of  the  two 
existing  companies  as  it  develops  in  future  years.  The  coal  supply  is  a  vital  factor. 
The  Great  Northern  gets  its  supply  by  way  of  the  lakes,  but  the  St.  Paul  has  always 
been  handicapped  in  this  regard.  To  meet  this  need  the  Chicago,  Terre  Haute  & 
Southeasitern  has  been  recently  acquired.  Its  location  with  reference  to  the  St. 
Paul-Great  Northeto  system  is  shown  on  map  17,  together  with  the  location  of  the 
Indiana  Harbor  Belt  line  and  the  Chicago,  Milwaukee  &  Gary.  Every  inducement 
to  avoid  congestion  in  the  Chicago  district  should  be  afforded,  and  it  may  well  be  that 
the  Chicago,  Milwaukee  &  Gary  will  serve  as  an  outer  belt  line  for  this  system,  to  meet 
the  New  York  Central  outer  belt  line.  This,  however,  should  be  considered  as  a 
part  of  the  great  terminal  problem  at  Chicago.  Certain  phases  of  it,  together  with 
the  possible  merger  of  the  Soo  system,  are  gravely  considered  in  connection  with  other 
details  of  the  St.  Paul-Great  Northern  system,  later  in  this  chapter. 

The  Union  Pacific  Railroad  is  unique  among  transcontinental  lines,  in  having  thus 
far  refrained  from  entrance  into  Chicago  over  its  own  rails.  Most  of  the  other  com- 
petitors north  and  south  have  found  it  advantageous  to  operate  their  own  trains  from 
Lake  Michigan  to  the  Pacific  coast.  The  control  of  the  Illinois  Central  was  originally 
acquired  by  the  Union  Pacific  in*  1906,  directly  and  through  the  so-called  Railroad 
Securities  Company,  in  order  to  provide  its  own  independent  entrance  to  Chicago. 
But  the  complications  with  eastern  connections  which  threatened,  compelled  subse- 
quent treatment  of  the  Illinois  Central  western  lines  on  an  equal  footing  with  all 
competitors.  The  Union  Pacific  business  at  Council  Bluffs  is  at  present  widely  dis- 
tributed. For  1917  the  cars  delivered  and  received  from  seven  eastern  connections 
were  as  follows: 


Chicago  &  North  Western 

Chicago  Great  Western 

Chicago,  Burlington  &  Quincy. 
Chicago,  Rock  Island  &  Pacific 
Chicago,  Milwaukee  &  St.  Paul 

Illinois  Central 

Wabash 


Cars 
delivered. 


35,493 

3,965 

6,070 

7,906 

I  24, 291 

13, 375 
3,399 


Cars 
received. 


24,472 
4,638 
3,942 
4,453 

13,860 
5,692 
1,193 


^  California,  Utah,  Nevada,  and  Colorado  business  (all  except  north  coast). 
63 1.  C.  C. 


[-^4^ 


574  INTERSTATE  COMMERCE   COMMISSION   REPORTS. 

The  outstanding  fact  is  the  preponderance  of  the  Chicago  &  North  Western.  Ex- 
cepting the  St.  Paul,  the  North  Western  exchanged  more  cars  than  all  of  the  rest  of 
the  lines  put  together.  This  is  doubtless  due  to  two  facts.  The  first  is  the  exceptional 
facilities  afforded  by  the  North  Western.  But  its  line  according  to  the  table  of  dis- 
tances from  Omaha  to  Chicago  herewith  is  no  shorter  than  that  of  the  St.  Paul. 

Chicago  &  North  Western 487.7  miles. 

Chicago,  Milwaukee  <&  St.  Paul 487.9  miles. 

Chicago, Rocklsland <&  Pacific 502.7  miles. 

Chicago,  Burlington  &  Quincy 504     miles. 

Chicago  Great  Western .108.2  miles. 

Illinois  Central -,19.2  mUcs. 

An  equally  potent  factor  which  accounts  for  the  preference  to  the  North  Western  over 
the  St.  Paul,  doubtless,  is  the  heavy  traffic  from  the  east  by  way  of  the  Vanderbilt 
lines  which  the  North  Western  is  able  to  offer  in  exchange.  The  cars  received  from 
the  North  Western  are  almost  double  the  number  which  the  St.  Paul,  without  pre- 
ferred eastern  connections,  was  able  to  turn  over.  To  accommodate  this  heavy  traffic, 
the  Chicago  &  North  Western  has  created  a  first-class  low-grade  double-track  line, 
gtrictly  equal  to  the  best  Union  Pacific  standard.  Its  terminals  at  Chicago  and  its 
eastern  affiliations  render  it  beyond  all  question  the  natural  eastern  connection  for 
this  8\'8tem. 

Historically,  the  present  traffic  interchange  between  the  Union  Pacific  and  the 
North  Western  at  Council  Bluffs  is  significant.  During  the  seventiep  there  were  only 
three  railroads  in  competition,  the  Burlington,  the  Rock  Island,  and  the  North  West- 
ern. These  three  operated  into  Chicago  for  years  as  the  California  Fast  Freight  Line, 
which  distributed  the  traffic  equally.  Then,  as  the  Burlington  and  the  North  Western 
invaded  the  territory  west  of  the  Missouri  River,  thereby  becoming  competitors  of 
the  Union  Pacific,  the  latter,  in  1883,  entered  into  a  new  very  secret  tripartite  traffic 
arrangement  with  the  Rock  Island  and  the  St.  Paul.  To  this,  subsequently,  most 
of  the  eastern  connections  except  the  Burlington  were  admitted,  but  the  St.  Paul 
remained  as  a  preferred  connection  with  the  Union  Pacific  over  the  North  Western 
only  24  days.  With  the  gradual  inclusion  of  six  eastern  connections,  all  bearing  the 
solicitation  and  gathering  expense  in  order  to  give  the  Union  Pacific  a  long  haul  to 
Ogden  in  solid  trainloads,  the  secret  arrangement  lost  its  charm.  It  was  succeeded 
in  October,  1902,  by  the  present  Union  Pacific- North  Western  compact,  under  which 
the  latter  becomes  a  first-preferred  connection  into  Chicago.  This  it  remained  except 
for  a  brief  interval,  when  the  North  Western  put  on  a  through  passenger  train  to  the 
northwest  over  the  Northern  Pacific.  The  result  was  that  the  St.  Paul  was  promptly 
and  for  a  brief  season  promoted  to  a  distinctly  closer  second-preferred  connection. 
The  incident  is  significant  as  indicating  the  whip  hand  which  the  Union  Pacific  is 
able  to  hold  over  its  connections  into  Chicago.  It  is  a  situation,  superficially  at  least, 
which  is  hardly  satisfactory  from  the  point  of  view  of  fairness  in  the  division  of  the 
through  rates. 

The  alliance  of  the  Chicago  A  North  Western  with  the  Union  Pacific  conforms  in 
another  respect  to  the  requirements  of  the  act.  The  statute  directs  that  strong  and 
weak  properties  shall  be  combined.  The  North  Western,  always  considered  a  strong 
road  because  of  its  honest  and  conservative  financing,  has  suffered  nevertheless,  along 
with  other  properties,  similarly  circumstanced,  by  reason  of  war  conditions.  The 
case  is  quite  parallel  to  that  presented  by  the  New  York  Central  system  in  1914.  The 
strength  of  the  Lake  Shore  and  of  the  Union  Pacific  alike  arose  in  part  from  the  fact 
that  they  enjoyed  the  long  haul  over  the  line,  and  yet  were  not  exposed  to  the  heavy 
overhead  and  other  terminal  expenses  incident  to  location  in  a  congested  center;  and 
as  labor  costs,  interest  rates,  and  other  overhead  have  risen,  the  division  of  the  through 
rate  between  terminal  properties  and  line  properties  has  lost  balance.    The  New 

63 1.  C.  C. 


CONSOLIDATION   OF  RAILROADS. 


575 


England  situation  is  quite  analogous,  also.  On  the  New  York  Central  system,  the 
Gordian  knot  was  cut  by  merger  in  1914  of  the  Lake  Shore  and  the  New  York  Central. 
Thus  the  superabundant  strength  of  the  Lake  Shore  was  employed  to  assist  the  New 
York  Central  through  its  difficult  terminal  problems,  making  it  possible  among  other 
things  to  issue  bonds  for  large  amounts  on  the  joint  credit  of  all  the  mileage  which 
profited  by  the  terminal  outlay.  Applied  to  the  case  in  hand,  the  strength  of  the 
Union  Pacific  ought  in  precisely  similar  fashion  to  be  used  to  lighten  the  terminal 
load  laid  upon  the  North  Western  at  this  juncture.  The  t^ro  properties  are  part  and 
parcel  of  the  best  direct  transcontinental  route  at  present.  But  it  should  be  operated 
as  one  property  from  end  to  end,  permitting  the  earnings  on  the  long  haul  to  balance 
up  against  the  heavy  expenses  at  either  end,  but  notably  in  Chicago.  Such  matters 
as  taxes  on  increased  land  values  and  abolition  of  grade  crossings  are  among  the  other 
items  above  mentioned  for  which  provision  has  to  be  made.  This  expedient  of 
merger  of  connecting  strong  and  weak  roads  will  also  avoid  the  difficult  task  in  the 
future,  otherwise  laid  upon  the  Commission,  of  having  to  decide  upon  the  proper 
"division  of  the  through  rate.  It  is  believed  therefore  that  this  consideration  fortifies 
substantially  the  recommendation  for  merger  based  upon  interchange  of  traffic.  And 
incidentally,  of  course,  the  Chicago,  St.  Paul,  Minneapolis  &  Omaha,  controlled  by 
the  North  Western  system  since  1883,  and  built  into  it  fundamentally,  should  be 
merged  corporatively  with  the  other  two. 

Comprehensive  development  of  the  Union  Pacific  system  calls  for  adequate  entrance 
into  St.  Louis.  This,  neither  the  present  Union  Pacific  nor  the  North  Western  has 
'ever  had.  Hitherto  the  policy  of  open  trading  on  traffic  interchange  at  the  Missouri 
River  gateways  has  obviated  the  necessity  for  such  a  line.  But  a  well-balanced 
national  strategy  obviously  requires  that  St.  Louis  as  well  as  Chicago  be  utilized  as 
an  eastern  base.  The  lines  most  favorably  placed  for  this  purpose  are  those  of  the 
Wabash  system,  west  of  the  Mississippi  River.  Their  location  appears  upon  map  15. 
A  considerable  interchange  v^ith  the  Wabash  even  now  is  indicated  by  the  cars  deliv- 
ered to  it  at  Omaha,  according  to  the  foregoing  table.  But  a  substantially  heavier 
delivery  by  the  Union  Pacific  to  the  Wabash  occurs  at  Kansas  City.  In  1917,  the 
Union  Pacific  turned  over  7,954  cars  and  received  3,154  carloads  in  exchange.  It  is 
obvious  again  that  a  natural  current  of  traffic  here  exists — ^a  closer  relation,  in  fact, 
than  is  indicated  with  any  other  of  the  great  systems.  The  proposed  dismemberment 
of  the  Wabash  affords  an  opportunity  to  build  in  these  lines  with,  it  is  believed, 
constructive  effect.  The  Wabash  trackage  over  the  Missouri,  Kansas  &  Texas  (dotted 
on  the  map)  to  Hannibal  affords  an  eastern  connection  to  the  proposed  Erie  system, 
and  constitutes  another  through  route  from  the  west,  avoiding  the  congestion  both  of 
Chicago  and  St.  Louis.  This  latter  link  might  well  be  taken  over  bodily  from  the 
Katy.    As  elsewhere  described,  it  is  of  little  or  no  use  to  the  proposed  Frisco  system. 

Yet  another  essential  complementary  line  in  the  new  Union  Pacific  system  is 
abstracted  from  the  Chicago  Great  Western,  that  system,  it  will  be  recalled,  being 
built  into  the  Burlington-Northern  Pacific  system  (page  592  infra).  But  the  line  from 
Des  Moines  to  Kansas  City  is  superfluous  for  the  Burlington  and,  as  map  15  indicates, 
it  distinctly  adds  to  the  effectiveness  of  the  Union  Pacific  system.  It  is  recommended 
therefore  that  this  division  of  the  Chicago  Great  Western  be  thus  transferred;  and  that 
trackage  rights  up  to  Marshalltown,  Iowa,  be  given,  in  order  to  cut  off  the  corner  on 
the  route  to  Chicago.  This  would  have  an  added  advantage,  as  the  Chicago  Great 
Western  has  a  poor  station  and  location  at  Marshalltown.  The  station  of  the  North 
Western,  it  is  alleged,  could  profitably  serve  for  both  systems. 

The  possible  transfer  of  the  Central  Pacific  from  the  control  of  the  Southern  Pacific 
Company  to  the  Union  Pacific  is  one  of  the  gravest  single  issues  calling  for  determina- 
tion under  this  plan.  The  geographical  relationship  of  these  properties  is  depicted 
on  map  15.    An  immense  investment  and  a  vital  and  integral  interest  of  the  Southern 

63 1. 0. 0. 


576 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


577 


*f 


y 


•^ 


m 


''^ffWHi. 


Pacific,  deeply  rooted  hu^torically,  conflict"*  with  the  alleged  nationar  policy  laiiT 
down  two  generations  ago  in  the  Patrific  railroad  acts.    The  is3ue  involved  has  en- 
gaged the  attention  of  the  Supreme  Court  of  the  United  States  since  1906.    The  first 
suit  (226  U.  S.,  61)  resulted  in  a  decree  hy  the  Supreme  Court  in  1912,  directing  an 
unmerger  of  the  Southern  Pacific  from  the  Union  Pacific.    Thereafter  proceeding:* 
were  again  instituted  in  1914,  to  compel  a  severance  of  the  Central  Pacific  in  turn 
from  the  Southern  Pacific.    The  fir.^t  decision,  in  1917,  in  this  second  suit  wa^  rendered 
in  the  United  States  district  court  of  Utah  in  favor  of  the  Southern  Pacific  Company. 
Since  that  time  judicial  proceedingd  seem  V)  have  been  held  in  su-^pen^e;  and,  a^ 
already  set  forth,  the  apparent  intent  of  the  transportation  act  of  1920  was  to  transfer 
all  such  matters  concerning  consolidation,  railroad  competition,  and  the  like,  to  the- 
juri  diction  of  the  Interstate  Commerce  Commission.     But  the  formal  proceedings  in 
the  second  dissolution  suit  have  not  been  entirely  discontinued.     The  brief  for'  the- 
appellant  is  already  in  print,  containing  a  mass  of  valuable  evidence. 


KEY 
C«ntrol  f%)cif  ic  Ry  Co 
Soufhem  F^ofic  R  R  Co 
Souf  h  Pacific  Coast  R^  Co 
Cent  %c  Lines  fobe  convyd  toS  P 
CentfbtTixkjtJDpftta  on  S  P  Lne» 
SoFbcTrcK9e  Opihs  on  C  P  Lines 


The  Central  Pacific  and  the  Southern  Pacific  ab  initio  are  an  organic  unit  of  inter- 
dependent parts.  Historically  there  can  be  no  question  about  this.  In  fact,  for  many 
years  the  Central  Pacific  was  the  nucleus  from  which  the  great  Southern  Pacific  sys- 
tem developed.  The  two  properties,  bom  of  a  common  parentagej  subsequently  grew 
up  as  ''interdependent  members  of  one  united  family.  They  were  conceived  and 
constructed  as  parts  of  one  system. ' '  The  utter  absence  of  plan,  in  fact,  as  to  corporate 
relationship  between  these  two  properties  even  suggests  that  it  was  not  without  design. 
A  brief  resume  of  the  history  seems  essential.  The  Central  Pacific  Railway  was  built 
by  the  "big  four,"  Huntington,  Stanford,  Hopkins,  and  Crocker.  In  1870  the  con- 
•tructed  road  ran  from  Ogden,  Utah,  north  of  the  Great  Salt  Lake  via  Sacramento, 

63 1,  c.  a 


Lathrop,  and  Niles  to  Oakland,  Calif.  The  detailed  geography  is  shown  by  the  sketch 
map  herewith.  At  this  time  there  was  no  railroad  route  open  to  the  east  by  way 
■of  southern  California.  It  was  not  until  1883  that  the  junction  was  made  with 
other  railroads  from  New  Orleans  on  the  Gulf  of  Mexico.  Until  this  time  all  the 
California  lines,  as  constructed,  oftentimes  by  the  so-called  Southern  Pacific  Railroad, 
were  merely  feeders  for  the  Central  Pacific  Railroad.  The  entire  combination,  even 
in  1883,  after  the  junction  with  the  railroads  from  New  Orleans,  was  known  as  the 
Central  Pacific  system.  In  1884  the  Southern  Pacific  Company  was  incorporated, 
and  to  it  all  of  the  various  railroads,  regardless  of  ownership,  were  leased  for  long 
terms.  At  this  time  the  name  was  then  changed  from  the  Central  Pacific  to  the 
Southern  Pacific  system.  But  throughout  this  extended  period  an  utter  lack  of  legal 
coherence  attends  the  development. 

The  physical  interrelationship  of  the  Central  and  Southern  Pacific  railroads  result- 
ing from  this  haphazard  history  is  exhibited  upon  the  sketch  map  herewith.  The 
original  line  from  Lathrop  down  the  San  Joaquin  Valley  to  Goshen  was  owned  by  the 
Central  Pacific,  but  all  the  feeders  up  to  Sacramento  were  built  by  the  Southern 
Pacific.  Increasing  business  brought  about  the  construction  after  1891  of  a  second 
line  through  the  San  Joaquin  Valley.  This  is  known  as  the  West  Side  line,  owned  by 
the  Southern  Pacific,  in  contradistinction  to  the  East  Side  line,  owned  by  the  Central 
Pacific.  But  the  two  lines  from  Goshen  north  are  apparently  operated  as  essential 
parts  of  a  double-track  system.  Constant  congestion,  it  is  alleged,  would  result 
without  their  complementary  use.  A  further  vital  interrelation  exists  concerning 
the  so-called  Benicia  short  line.  This  route,  shown  by  the  dotted  line  from  Sacra- 
mento, shortens  the  distance  to  San  Francisco  by  50  miles.  It  was  built  and  owned 
by  the  Southern  Pacific.  And  then  subsequently  the  Southern  Pacific  built  the  line 
from  Redwood  City  directly  into  San  Francisco.  Thus  the  Central  Pacific  became 
dependent  upcm  the  Southern  for  this  sole  access  to  San  Francisco,  other  than  by  the 
Oakland  ferry  service.  Yet  further  interrelation  arises  at  the  terminals  themselves 
in  San  Francisco.  These  all  belong  to  the  Southern  Pacific  Company  or  the  Southern 
Pacific  Railroad  Company.  The  Central  Pacific  has  no  terminals,  while  at  Oakland 
the  reverse  is  true,  the  main  terminals  belonging  to  the  Central  Pacific.  And  then, 
in  conclusion,  the  Central  Pacific,  as  the  detail  map  shows,  owns  the  original  line  from 
Roseville,  Calif.,  to  the  Oregon  boundary.  Even  to-day  the  Southern  Pacific  has  no 
line  of  its  own  up  the  Sacramento  Valley  beyond  Tehama.  The  financial  relationships 
of  the  two  corporations  are  even  more  intricate,  if  possible,  than  their  intertwining 
■physically.  Not  two  corporations,  but  three  now  become  involved.  The  Southern 
Pacific  Company,  not  the  Southern  Pacific  Railroad  Company,  is  the  owner  of  all  the 
•outstanding  stock  of  the  Central  Pacific.  Whether  necessarily  or  not,  this  holding 
•company  has  guaranteed  payment  of  the  principal  and  interest  of  practically  all  the 
•outstanding  bonds  of  the  Central  Pacific.  There  are  nearly  $170,000,000  of  indebted- 
ness, including  a  European  loan  of  250,000,000  francs.  This  particular  issue  of  4 
per  cent  bonds — note  the  rate  of  interest  in  case  of  refunding — becomes  payable  imme- 
diately whenever  the  Southern  Pacific  Company  ceases  to  own  the  Central  Pacific. 
AH  told,  it  is  a  pretty  congeries  of  physical  and  financial  relationships. 

The  objections  to  an  unmerger  of  the  Central  Pacific  from  the  Southern  are  sub- 
rstantial,  many  of  them  self-evident  already.  They  are  sharply  distinguishable  into 
two  types,  legal  and  economic,  respectively.  The  legal  objections  have  to  do  with 
two  bodies  of  law  enacted  at  widely  separate  intervals  of  time.  The  Pacific  railroad 
acts  were  passed  before  these  railroads  were  constructed.  The  Sherman  antitrust  law 
was  enacted  in  1890,  years  after  they  had  entered  into  all  the  intimate  relationships 
:above  described.  It  might  well  happen  therefore  that  the  control  of  the  Central 
Pacific  by  the  Southern  Pacific  so  far  antedated  the  Sherman  act  as  to  leave  that  rela- 

63  I.  C.  C. 


4^ 


f^' 


578 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


579 


I  ( 


!'l 


tionship  valid  under  the  statute  against  monopoly,  while  still  it  might  be  true  that 
this  continued  control  was  in  contravention  of  the  purpose  of  the  original  Pacific  rail- 
road acts.  Upon  these  legal  points,  precisely,  it  would  be  presumptuous  to  essay  an 
opinion.  But  upon  the  economic  issues  and  the  matters  of  practical  business— down- 
right feasibility  and  the  like— a  judgment  under  this  consolidation  plan  must  be  ren- 
dered. Little  aid  as  to  economic  reasoning  is  derived  from  the  judicial  proceedings, 
particularly  in  view  of  the  absence  of  unanimity.  But  the  record  of  facts  adduced 
in  these  proceedings  as  to  competition  throughout  the  Pacific  coast  territory  is 
necessarily  vital. 

The  economic  advantage  of  ownership  and  operation  of  a  line  from  the  middle  west 
clear  through  to  San  Francisco,  absolutely  independent  of  all  other  routes,  is  so  evi- 
dent technically  as  to  suflfice  in  itself  for  such  recommendation  in  this  plan.    The 
facts  developed  in  judicial  proceedings  demonstrate  that  the  Southern  Pacific  prior 
to  1900  enjoyed  a  monopoly  of  the  California  field.    This  company  participated 
unavoidably  in  all  coast-to-coast  business,  whether  it  went  direct  ovefr  the  Central 
Pacific,  owned  by  the  Southern  Pacific,  or  whether  it  went  by  way  of  the  Sunset 
Route  through  New  Orleans.    San  Francisco  was  reached  in  either  event  only  over 
its  own  rails.    But  it  was  evidently  not  a  matter  of  indifference  whether  this  traffic 
moved  one  way  or  the  other;  in  view  of  the  fact  that  the  Southern  Pacific  received 
less  than  one-third  of  the  total  revenue  from  transcontinental  freight  via  Ogden, 
whereas  by  the  Sunset  Route  through  the  Gulf  ports  no  division  whatever  with  con- 
necting lines  was  necessary.    There  was  active  solicitation  naturally  for  each  route. 
But  it  was  not  immaterial  to  the  Southern  Pacific  which  way  the  traffic  moved.    Nor^ 
in  fact,  was  the  Union  Pacific  entirely  neutral  in  its  attitude  toward  coast-to-coaat 
business,  because  of  the  choice  within  its  own  system,  of  routing  traffic  via  the  north- 
west over  its  own  Oregon  Short  Line,  or  of  turning  it  over  to  the  Central  Pacific  at 
Ogden  and  dividing  the  revenue  with  the  Southern  Pacific  as  a  connection.    The 
judicial  record  is  filled  with  evidence  of  the  keenness  of  competition,  prior  to  the 
Harriman  merger,  which  was  practically  ended  by  the  consolidation  after  1901;  and 
which  ceased  from  that  time  until  the  dissolution  decree  in  1912.    As  to  the  existence 
of  such  competition  in  general  there  is  abundant  evidence  in  the  Supreme  Court 
proceedings.    Evidently  the  Southern  Pacific  had  enough  interest  in  its  subsidiary 
to  maintain  an  active  rivalry  for  business.    But  what  apparently  was  not  sufficiently 
developed  in  this  record  was  the  distinction  between  rivalry  for  business  from  the 
Atlantic  seaboard  and  its  neighborhood,  and  competition  for  business  from  the  middle 
west;  and  upon  this  distinction  much  of  the  advantage  which  may  conceivably 
accrue  from  a  complete  severance  of  the  two  companies  depends.    The  point  is  sa 
important  that  it  merits  particular  emphasis.* 

The  entire  transcontinental  rate  adjustment  is  affected  by  the  circumstance  that 
the  Southern  Pacific  and  other  transcontinental  lines,  wholly  or  in  part  operated  by 
water,  compete  most  effectively  at  the  Atlantic  seaboard.  This  arises  from  the 
relative  cheapness  of  water  carriage  for  certain  classes  of  traffic.  But  the  effective- 
ness of  this  competition  progressively  decreases  as  the  distance  inland  from  the  sea- 
board becomes  greater.  For,  ob\iously,  the  traffic,  if  it  go  by  the  roundabout  sea 
route,  must  first  bear  the  rail  cost  of  carriage  back  eastward  to  the  port.  This  cir- 
cumstance accounts,  of  course,  for  the  so-called  blanket  rate  on  transcontinental 
business  for  the  United  States  east  of  Chicago.  Applying  this  circumstance  to  the 
case  in  hand,  it  is  evident  that  progressively  with  increase  in  the  distance  from  the 
seaboard,  the  force  of  Southern  Pacific  competition  for  its  Sunset  Route  declines, 
until  a  dead  center  is  reached  at  which  traffic  presumably  might  move  directly  all 

» This  point  is  surprisingly  neglected;  even  in  the  Brief  for  Appellant,  United  States  Supreme  Court ,. 
U.S.A.  V.  So.  Pac.  Co.,  etc.,  recently  published. 

63  I.  C.  C. 


rail  via  Ogden,  or  else  back  to  the  seaboard  and  by  vessel  round  to  New  Orleans. 
This  business  from  the  neighborhood  of  the  coast  was  naturally  that  to  which  the 
Southern  Pacific  had  the  strongest  claim.  Both  because  of  operating  ability  and 
strength  of  financial  motive,  what  happened  practically  was  that  competition  was 
open  and  keen  between  the  all-rail,  that  is  to  say,  the  Central  Pacific  route,  and  the 
Sunset  Route,  throughout  the  territory  in  which  the  Sunset  Route  was  more  or  less 
handicapped  by  reason  of  the  expense  of  the  back  haul  to  the  Atlantic  seaboard. 
But  actually  a  dead  line  existed,  somewhere  between  Chicago  and  Pittsburgh,  the 
location  varying  according  to  the  nature  of  the  traffic;  and  the  Southern  Pacific  did 
not  solicit  or  prefer  to  haul  via  Ogden  any  traffic  having  origin  or  destination  east  of 
that  line.  The  Central  Pacific  was,  in  fact,  accorded  by  the  Southern  Pacific  every 
opportunity  to  do  the  maximum  amount  of  transcontinental  business,  provided  only 
that  its  origin  or  destination  was  west  of  the  dead  line  above  mentioned.  And  the 
fact  that  all  through  business  depended  finally  upon  the  good  will  of  the  Southern 
Pacific,  manifested  in  rates,  facilities,  dispatch,  and  all  of  the  other  concomitants, 
gave  that  company  a  decisive  influence  ultimately  in  the  carrjdng  out  of  its  plans. 
This  circumstance  undountedly  influenced  the  late  E.  H.  Harriman  to  acquire  the 
control  of  both  the  Southern  Pacific  and  the  Central  Pacific  in  order  to  command 
the  situation. 2 

The  existence  of  competition  between  the  Central  and  Southern  Pacific  before  1901 
and  since  1918  is  clearly  established.  Even  the  circuit  court  decision  of  1917  in  favor 
of  the  Southern  Pacific  conceded  this  point.  But  while  genuine  for  certain  territwy, 
it  was  only  half-hearted  or  less  for  certain  other  territory;  and  the  Central  Pacific — 
that  is  to  say,  the  Union  Pacific — coincidently  was  bound  to  be  excluded  from  certain 
regions,  so  long  as  it  was  controlled  by  another  transcontinental  through  line  oper- 
ating partly  by  sea.  But  the  effect  of  the  existing  relationship  upon  competition  is 
not  confined  to  the  Central  Pacific  alone.  All  other  lines  in  Pacific  coast  territory 
would  be  affected  by  this  unmerger.  The  disability  of  the  Western  Pacific  at  ita 
San  Francisco  terminus  is  a  matter  of  history.  Effective  competition,  for  this  line  or 
any  other  in  future,  depends  upon  a  determination  of  the  overwhelming  predomi- 
nance in  California  transportation  which  has  been  exercised  by  the  Southern  Pacific 
Railrosui.  Competition  in  transportation  with  the  outside  world  is  and  always  has 
been  the  supreme  need  of  California.  The  unmerger  of  the  Central  and  Southern 
Pacific  would  open  up  business  to  the  Western  Pacific  and  perhaps  to  the  Santa  Fe, 
as  it  never  can  be  opened  up  otherwise.  It  should  not  be  forgotten  that  an  immense 
tonnage  originates  in  California,  the  preponderating  movement  being  east  rather  than 
west.  Thus  in  1917  the  Union  Pacific  received  71,339  carloads  of  freight  from  the 
Central  Pacific  (Southern  Pacific)  and  delivered  westbound  in  exchange  only  40,005 
carloads.  Of  the  eastbound  tonnage  only  11,000  carloads  were  destined  to  local 
points  on  the  Union  Pacific,  and  of  the  westbound  traffic  only  7,341  carloads  originated 
on  the  Union  Pacific.  This  relativity  is  typical.  The  California  lines  hold  the  big 
end  of  the  stick.  Theoretically  the  California  shipper  has  a  right  to  route  his  freight; 
but  the  Southern  Pacific,  controlling  at  present  all  of  the  local  lines,  is  too  powerful 
to  risk  affronting.  To  confer  a  real  freedom  of  routing  upon  the  California  shipper, 
as  well  as  thoroughgoing  rivalry  in  service  everywhere,  would  certainly  be  an  unmixed 
advantage. 

The  danger  of  subjection  of  an  entire  community  to  the  undue  influence  of  two 
railroads  like  the  Southern  Pacific  and  the  Atchison,  Topeka  &  Santa  Fe  is  very 
considerable  when  such  lines  perform  the  double  function  of  gathering  or  delivering 
traffic  locally  and  thereafter  of  enjoying  solely  the  long  haul  thereon.    In  other  words, 

*  Cf.  again  Brief  for  AppeUant,  etc.,  pages  147, 154,  and  158  especially. 
»  Cf.  Brief  for  Appellant,  etc.,  pages  81, 142,  and  181,  especially. 

63 1.  C.  C. 


\} 


"V\4h\  <■ 


580 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION  OF  RAILROADS. 


581 


the  situation  in  California  might  conceivably  be  bettered,  did  it  not  involve  drastic 
dismemberment,  if  all  of  the  California  north-and-south  lines— gathering  lines,  so  to 
speak — from  Seattle  to  Los  Angeles  were  completely  independent  of  the  long-haul 
transcontinental  lines.  This  suggests  a  regional  group  treatment  for  the  Pacific  slope 
like  that  adopted  under  this  plan  for  New  England,  Florida,  and  the  Michigan  penin- 
sula. It  would  avoid  the  prejudice  against  direct  carriage  which  arises  from  the  per- 
formance of  the  double  function  by  the  same  railroads,  gathering  and  delivering  the 
freight  locally,  as  distinct  from  consolidating  it  for  the  long  haul.  The  present  con- 
dition whereby  lines  through  southern  California  compete  clear  up  to  Seattle  with 
the  more  direct  routes,  makes,  to  be  sure,  for  activity  of  competition,  but  also  for  eco- 
nomic waste.  But  such  general  considerations  are  hardly  to  the  point.  The  imme- 
diate decision,  seeking  to  minimize  corporate  disniption,  has  to  do  only  with  the 
relation  of  the  Central  Pacific  to  the  Southern  Pacific.  And,  on  the  ground  that  a 
more  nearly  universal  and  thoroughgoing  instead  of  half-hearted  and  tepid  compe- 
tition may  be  promoted  for  the  California  slope,  the  dissolution  is  herewith  recom- 
mended. 

Another  advantage  of  Central  Pacific  unmerger  concerns  provision  for  the  future 
of  a  Central  Pacific  Railroad  developed  fully  up  to  the  physical  standards  of  the  Union 
Pacific  and  the  Chicago  &  North  Western  to  constitute  a  prime  transcontinental  route 
through  the  heart  of  the  United  States.  It  is  not  alone  that  through-train  schedules 
by  one  company  could  be  made,  or  that  through  rates  and  billing  could  be  estab- 
lished, but  also  that  ample  investment  should  be  made  in  double  tracking  and  all 
of  the  other  instrumentalities  necessary  to  a  first-class  line.  While  the  Central  Pacific 
naturally  is  so  profitable  to  its  present  owner  it  will  never  be  allowed  to  lapse  into 
downright  neglect.  But  there  is  a  real  distinction  between  passive  maintenance, 
•even  at  a  high  standard,  and  a  positive  program  of  upbuilding  and  development. 
It  seems  clear  beyond  question  that  an  undivided  control  is  desirable  to  attain  this 
«nd.  No  consent  and  concurrence  at  every  point  by  a  company  in  possession  only 
of  the  western  end  of  a  through  route,  and  which  also  owns  and  is  more  largely  inter- 
ested in  operating  a  competing  and  a  longer-haul  line,  should  be  allowed  to  preju- 
dice the  future  policy  of  the  direct  line  as  to  its  physical  development.' 

The  foregoing  considerations  are  in  entire  consonance  with  the  federal  railroad  acts 
of  1862-1864,  whioh  were  unquestionably  intended  to  promote  direct  intercourse 
with  the  Pacific  coast  as  part  of  a  great  national  policy.  These  acts  provide  as  a  con- 
dition of  the  subsidies  and  land  grants  that  "th^  whole  line  of  said  railroad  »  »  * 
shall  be  operated  and  used  for  all  purposes  of  communication  *  *  *  so  far  as  the 
public  and  government  are  concerned,  as  (me  connected,  ccmtinuous  line  [our  italics]." 
Whether  or  not  the  existing  relationship  violates  the  Sherman  antitrust  law,  subse- 
quently enacted  in  1890,  may  remain  open  to  question;  but  it  is  evident  that  contin- 
ued Southern  Pacific  control  is  in  contravention  of  such  statutes  as  these,  under  which 
the  Union  Pacific  and  the  Central  Pacific  were  constnicted .  These  acts  were  intended 
to  provide  for  a  system  of  railroads  'from  the  Missouri  River  to  the  Pacific  Ocean." 
Is  it  not  clear  that  the  purpose  both  of  laws  and  of  the  large  grants  to  aid  in  the  con- 
struction of  these  railroads  would  be  defeated  if  practically  one-half  of  this  route  were 
to  remain  in  the  hands  of  a  rival  company,  operating  a  competitive  and  more  circuitous 
route,  which  afforded  it  a  longer  and  more  profitable  haul  on  much  traflic  that  other- 
wise would  follow  the  direct  all-rail  line? 

Finally— and  this  caps  the  argument  for  transfer  of  the  Central  Pacific  to  the  Union 
Pacific  SA'stem — this  entire  plan  purports  to  bring  about  a  more  evenly  balanced 
•competition.  An  endeavor  is  being  made  to  match  two  great  transcontinental  sys- 
tems with  one  another  in  order  to  keep  each  one  on  its  toes  and  to  provide  service  for 
the  public.    The  Burlington  system,  if  it  be  given  the  Denver  &  Rio  Grande  and  the 

63 1.  C.  C. 


Western  Pacific,  will  also  have  a  line  clear  through  from  Chicago  to  the  coast.  It  will 
be  free  to  compete  for  business  by  this  direct  all-rail  line  everywhere  throughout  the 
east.  It  will  not  be  embarrassed  by  having  to  protect  or  to  consider  another  round- 
about water  line,  which  constitutes  in  fact  a  major  investment.  There  will  be  no 
dead  line,  setting  off  territory  from  which  traffic  will  not  be  allowed  to  move  by  the 
most  direct  all-rail  route.  To  balance  competitive  conditions,  the  Union  Pacific 
must  be  equally  free.  Its  line  from  Chicago  to  the  coast  must  be  utterly  untrammeled 
by  complications  arising  from  interrupted  investments.  The  only  way  to  bring  this 
about  is  to  constitute  of  it  an  equally  consolidated  property  clear  through  from  Chi- 
cago to  San  Francisco. 

The  Central  Pacific  unmerger  can  not  be  discussed  without  due  consideration  of 
the  economic — not  the  legal — objections  thereto.  The  first  of  these  is  that  local 
transportation  in  California  would  probably  suffer  at  first  from  the  disorganization 
incident  to  separation  of  these  properties.  This  accounts  in  part,  perhaps,  for  the 
attitude  of  the  California  railroad  commission,  which  has  resolutely  set  its  face 
against  the  proposal.  The  president  of  the  commission,  Mr.  Eshleman,  testified  not 
only  that  the  separation  would  tend  to  increase  rates  where  double  service  was  sub- 
stituted for  single  service,  but  also  that  these  lines,  separately  owned  and  managed, 
could  not  furnish  as  good  service  as  is  now  rendered  under  single  management.  "  The 
acquisition  of  the  Central  Pacific  by  the  Union  Pacific  would  result  in  breaking  up 
a  well-constructed  single  system  of  railroads  in  this  state  into  two  dissociated  and 
incomplete  systems,  neither  of  which  would  be  adequate  conveniently  to  serve  the 
traffic  needs  of  the  state  of  California."  There  is  force  in  this  objection.  As  to  all 
that  concerns  the  impracticability  of  unmerger,  answer  will  shortly  be  given.  That 
is  an  immediate  and  temporary  consideration.  For  the  longer  future,  choice  has  to 
be  made  between  competition  in  service  and  monopoly.  And  all  that  has  been  said 
about  the  advantage  of  a  transportation  monopoly  for  terminal  communities  like  New 
England  is  equally  applicable  to  the  terminal  community  on  the  Pacific  slope.  Local 
California  business  may  possibly  pay  the  penalty,  temporarily  at  least,  for  dissolu- 
tion; but  it  is  believed  that  a  genuine  open  competitive  market  for  through  business 
with  the  outside  world  by  rail  will  be  correspondingly  promoted. 

The  utter  impracticability  of  Central  Pacific  unmerger,  by  virtue  of  the  historic 
corporate  interrelation  already  described,  is  stoutly  represented  as  a  bar  thereto.  A 
conclusive  answer  to  this  objection,  superficially  formidable  as  it  is,  is  at  once  at 
hand .  This  is  the  second  dissolution  plan ,  so  called ,  which  was  adopted  and  completely 
worked  out  in  detail,  by  the  Central  and  Southern  Pacific  companies  as  a  result  of 
the  dissolution  decrees  of  the  Supreme  Court  of  the  United  States  in  1912.  This 
agreement,  dated  February  8,  1913,  involved  the  sale  by  the  Southern  Pacific  to 
the  Union  Pacific  of  its  Central  Pacific  stock.  The  properties  were  separated  by 
assignment  to  the  Southern  Pacific  of  the  line  from  Tehama  north  to  the  Oregon 
boundary  (see  map  at  page  576)  and  of  the  line  from  Newark  to  Redwooa,  together 
with  running  rights  over  the  Central  Pacific  main  line  from  Brighton  to  Lathrop  and 
Niles.  This  left  the  Southern  Pacific  a  continuous  line  from  north  to  south,  as  well 
as  complete  entrance  to  San  Francisco.  Conversely,  the  Southern  Pacific  agreed 
to  give  the  Central  Pacific  a  999-year  joint  use  of  the  Benicia  short  line  from  Sacra- 
mento to  Oakland.  The  exclusive  grant  of  this  last  facility,  which  excluded  the 
Western  Pacific,  was  made  the  ground  for  disapproval  by  the  California  railroad 
commission.  The  supplementary  agreement  of  March  14,  1913,  also  reprinted  here- 
with, expunged  this  provision.  But  the  whole  matter  ultimately  fell  through  be- 
cause of  expiration  of  the  underwriting  syndicate  formed  for  the  purpose  of  carry- 
ing out  the  dissolution  plan.  Nothing  came  of  the  business  therefore;  but  the  agree- 
ments reached,  even  although  under  legal  duress,  are  believed  to  be  practicable. 

63 1.  C.  C. 

63763—21 9 


r 

I 


U 


-^iL 


,-^ 


582 


INTERSTATE  COMMERCE  COMMISSION  REPORTS. 


They  afford  a  conclusive  answer  to  the  objection  that  sach  unmerger  is  impossible. 
A  copy  of  the  pertinent  section  of  this  agreement  and  the  supplementary  agreement 
of  March  14,  1913  (not  executed),  is  reproduced  herewith. 

Agreement,  dated  February  8,  191  '.. 

Second. 

11.  It  is  hereby  agreed  by  all  the  parties  hereto  that,  immediately  upon  the  effec- 
tive date  of  this  agreement  the  Central  Pacific  Railway  Companv  Will,  make  and  the 
oouthem  Pacific  Railroad  Company  will  accept,  and  the  Southern  Pacific  Companv 
will  guarantee  on  the  part  of  the  Southern  Pacific  Railroa^l  Companv  a  lease  for 
a  term  of  999  y^,  of  the  line  of  railroad  of  said  Central  Pacific  RailWav  Companv 
extending  from  Tehama,  in  Tehama  County,  in  the  State  of  CaUfomia,  to  a  connec- 
tion with  the  hne  of  railroad  of  the  Oregon  and  Cahfomia  Railroad  Companv  at  the 
boundar\'  line  between  the  States  of  California  and  Oregon,  with  all  franchises 
nghts,  privileges,  immumties  and  other  property  appertaining  thereto  except 
equipment,  at  an  annual  rental  payable  m  equal  semiannual  installm'erits  on 
the  first  day  of  June  and  the  first  day  of  December  of  each  year,  equal  to  a  vear's 
interest  at  the  rate  of  five  per  cent  per  annum  on  tiie  value  of  said  line  of  railroad 
and  its  franchises  and  appurtenances  (other  than  equipment)  to  be  leased  as  afore- 
said, to  be  ascertained  by  arbitration  as  hereinafter  provided,  in  the  event  that  the 
parties  hereto  shall  be  unable  within  twelve  months  from  the  effective  date  hereof 
to  agree  upon  said  valuation;  with  an  option  to  the  Southern  Pacific  Railroad  Com- 
pany to  purchase  tiie  said  leased  Une  of  railroad  and  its  appurtenances  at  the  valua- 
tion faxed  as  the  basis  of  rental  m  accordance  with  this  Section  11  whenever  said 
hne  and  its  appurtenances  can  be  conveyed  by  the  Central  Pacific  Railwav  Companv 
free  from  the  mortgage  hens  now  existing  thereon.  The  Central  Pacific  RailwaV 
Companv  hereby  agrees  that  it  will  create  no  additional  Uen  upon  said  line  of  raif- 
road  without  the  consent  of  the  Southern  Pacific  Railroad  Company  or  of  the  Soutii- 
em  Pacific  Company,  and  that  it  will  pay  the  interest  upon  all  bonds  now  outstand- 
ing secured  by  mortgage  hens  upon  said  line  of  railroad,  as  such  interest  shall  ma- 
ture, and  will  pay  tiie  principal  of  said  bonds  at  maturity,  and  tiiat  it  will  at  all  times 
mdemmfy  and  hold  harmless  tiie  Soutiiem  Pacific  Railroad  Company  and  the  South- 
em  Pacific  Company  from  and  against  the  enforcement  upon  said  hne  of  raifroad 
Mio  its  appurtenances  of  tiie  lien  of  any  of  said  mortgages;  and  tiie  Union  Pacific 
Railroad  Company  hereby  guarantees  the  performance  of  said  obligations  assumed 
by  tiie  Cenfral  Paofic  lUilway  Company.  Said  lease  shall  be  substantiallv  in  the 
form  of  the  draft  of  lease  hereto  attached  and  marked  Exhibit  A,  except  suchchanees 
in  floia  form  a^  shall  be  made  by  agreement  of  tiie  parties  and  approved  by  the  Rail- 
road Commission  of  CaUforma, 

12  It  is  hCTeby  agreed  by  all  tiie  parties  hereto  tiiat,  immediatelv  upon  tiie  effec- 
tive date  of  tills  agreement,  tiie  Central  Pacific  Railwav  Companv  mil  sell  and  con- 
vey to  said  Southern  Pacific  Railroad  Company  and  that  said  Southern  Pacific  Rail- 
road Company  will  purchase  tiie  line  of  railroad  of  the  Central  Pacific  Railwav  Com- 
pany, constructs!  and  under  constniction,  extenaing  from  a  connection  witii  tiie 
hne  of  railroad  described  m  Section  11  hereof  at  Weed  Station,  Siskivou  County 
California    to  a  connection  with  tiie  line  of  railroad  of  the  Oregon  and  CaUfomii 

.u  ^  11  *^°i?*^y  *^  °'^.  ?^^  ^*^'*^°  Station,  Lane  Countv,  Oregon,  bv  way  of  Kla- 
math Jails,  Oregon,  wUh  its  franchises,  rights,  privile^,  immunities  and  otiier 
property  appertaimng  thereto,  conveyed  by  the  Oregon  Eastern  Railwav  Company 
to  Central  Pacific  Railway  Company  by  deed  dated  February  29,  1912  As  the 
consideration  for  the  sale  aforesaid  said  Southern  Pacific  Railroad  Compaiiv  herebv 
agrees  to  assume,  Mid  indemnify  said  Central  Pacific  Railwav  Company  from  an^ 
against  any  expenditures  made  by  the  Central  Pacific  Railwav  Companv  or  for  its 
account  for  construction,  additions  or  betterments  in  connection  with  tiie  saio  rail- 
«i^/o  i^  appurtenances,  since  the  29th  day  of  Febniarv-,  1912,  and  agrees  to  as- 
sume and  indemmfv  and  save  harmless  the  Central  Pacific  Railwav  Companv  from 
and  against,  tiie  Cahforma  Nortiieastem  Division  First  Mortgage  Bonds  of  tiie  Ore- 
gon Eastern  Railway  Company  to  the  amount  of  $5,000,000,  face  value,  and  Exten- 

lh^^V^^\^^l^^'  7^^  i^^  '^*^'?^?  maturing  an/  payable  on  ^id  bonds 
thP  rwlf^' i?®  p*^  ""^  purchase  provided  for  in  this  section,  and  to  reimburse 
tiie  (.entral  Pacific  Railway  Company  for  all  interest  paid  by  it  on  said  bonds  and 
notes  which  accrued  subsequentlv  t»  February  29,  1912,  and  further  herebv  aSirn^ 
and  ^ees  to  pay  any  otiier  indebtedness  and  liainlities  now  outstanding  of  the  Ore- 
gon Eastern  Railway  Companv  heretofore  assumed  by  tiie  Central  Pacific  Railway 

63 1.  C.  C. 


CONSOLIDATION  OF  RAILROADS. 


583 


Companv  in  and  by  the  deed  of  February  29,  1912,  aforesaid;  and  the  Southern 
Pacific  Company  hereby  agrees  to  guarantee  the  obligations  agreed  in  this  section 
to  be  assumed  by  the  Southern  Pacific  Railroad  Company,  and  further  agrees  to 
cancel  and  surrender  the  aforesaid  Extensions  Purchase  Notes  now  held  by  it  to  the 
amount  aforesaid,  and  to  execute  and  have  dul\  recorded  a  release  by  it,  as  the  holder 
of  the  aforesaid  bonds  issued  by  the  Oregon  Eastern  Railwav  Company,  of  all  obliga- 
tions concerning  said  bonds  assumed  by  the  Central  Pacific  kail  way  Companv  in  and 
by  the  aforesaid  deed  dated  February  29,  1312.  * 

Third. 
13.  The  said  Southern  Pacific  Company  and  Southern  Pacific  Railroad  Company 
agree  to  grant,  and  hereby  do  grant  to  the  Central  Pacific  Railway  Company  the 
equal  joint  use  and  possession,  from  the  effective  date  of  this  agreement,  for  a  term  of 
999  years,  of  all  that  part  of  the  railway  and  appurtenant  property,  owned  either  by 
the  Southern  Pacific  Company  or  the  Southern  Pacific  Railroad  Company,  including 
telegraph  and  telephone  lines,  from  the  connections  thereof  with  the  Central  Pacific 
Railway  Company's  tracks  in  Sacramento^  California,  via  Benicia  and  Port  Costa  to 
connections  with  the  Central  Pacific  Railway  Company's  tracks  in  Oakland,  Calih 
fornia,  including  the  ferries  between  Benicia  and  Port  Costa  and  ferry  slips  at  Benicia 
and  Port  Costa,  and  any  bridge,  tube  or  tunnel  substituted  for  the  ferry  between 
Benicia  and  Port  Costa,  and  the  appurtenances  thereof,  except  rolling  stock  and 
supplies.  A  contract  shall  be  executed  and  delivered  by  the  parties  aforesaid,  imme- 
diately upon  the  effective  date  of  this  agreement,  covering  said  joint  use  and  pos- 
session, which  shall  contain  a  provision  for  the  payment  by  the  Central  Pacific  Rail- 
way Company  as  an  annual  rental  and  consideration  for  such  use  and  possession,  the 
sum  of  two  and  one-half  per  cent  per  annum  on  the  value  of  the  property  covered  by 
said  agreement,  in  two  equal  instalments,  on  the  first  day  of  June  and  the  first  day 
of  December  in  each  year  to  be  increased  by  two  and  one-half  per  cent  per  annum 
upon  the  actual  cost  (which  shall  include  transportation  and  insurance  and  a  just  sum 
to  cover  the  cost  of  superintendence  and  management)  to  the  Southern  Pacific  Com- 
pany or  the  Southern  Pacific  Raifroad  Company  of  all  improvements,  betterments 
and  additions  to  the  property  properly  chargeable  to  capital  account,  which  valuation 
shall  be  determined  by  agreement  'of  the  parties  or  by  arbitration  hereunder;  and  a 
provision  for  the  pa>Tnent  by  the  Central  Pacific  Railway  Company  of  a  proportion 
of  the  expense  of  maintenance  and  operation  of  said  Une  of  railroad,  with  its  termi- 
nals and  other  appurtenances.  •  Said  contract  shall  contain  substantially  the  terms 
expressed  in,  and  shall  be  substantially  in  the  form  of,  the  draft  of  contract  hereto 
attached  and  marked  Exhibit  B,  except  such  changes  in  said  form  as  shall  be  made 
by  the  parties  and  approved  by  the  Railroad  Commission  of  California. 

14.  From  the  effective  date  hereof  the  Central  Pacific  Railway  Company  shall  be 
entitled  to  trackage  or  running  rights  for  a  term  of  999  years  over  the  line  of  railroad 
of  the  Southern  Pacific  Railroad  Company  and  Southern  Pacific  Company  between 
Redwood  and  San  Francisco,  for  the  operation  of  through  freight  trains  only,  without 
right  to  do  local  business— Redwood  to  be  considered  local  to  Southern  Pacific  Com- 
pany—with an  option,  however,  to  the  Central  Pacific  Railway  Company  to  with- 
draw from  such  trackage  or  nmning  rights  at  any  time  within  two  years  from  the 
effective  date  hereof;  the  rental  to  be  paid  by  the  Central  Pacific  Railway  Company 
for  such  trackage  or  running  rights  to  be  determined  by  arbitration  in  the  manner 
hereinafter  provided,  if  the  parties  hereto  are  unable  to  agree  thereon. 

15.  Union  Pacific  Railroad  Company  and  Central  Pacific  Railway  Company  hereby 
apee  that  the  Central  Pacific  Railway  Company  shall,  and  Central  Pacific  Railway 
Company  does  hereby,  grant  to  the  said  Southern  Pacifac  Company  and  said  Southern 
Pacific  Railroad  Company,  or  either  of  them,  an  option  for  a  period  of  two  years  from 
the  effective  date  hereof  to  acquire  the  equal  joint  use  and  possession,  for  the  term  of 
999  years,  of  the  railway  owned  by  the  Central  Pacific  Railway  Company,  from  Newark 
to  Redwood,  California,  and  the  appurtenances  thereof,  except  rolling  stock  and 
supplies,  upon  the  same  terms,  conditions  and  rights  provided  in  the  foregoing  Sec- 
tion 13  with  reference  to  the  joint  use  and  possession  Ojf  the  line  of  railroad  between 
Sacramento  and  Oakland.  Such  use  shall  extend  to  the  cars  or  trains  of  any  corporar 
tion  owned  or  controlled  by  the  Southern  Pacific  Company. 

Fourth. 
17.  From  the  effective  date  hereof,  the  terminals  of  the  Southern  Pacific  Raifroad 
Company  (or  the  Southern  Pacific  Company)  and  the  Central  Pacific  Railway  Com- 
pany at  all  junctions  of  thefr  respective  lines  within  city  limits,  including  industry 
tracks,  shall  become  and  be  subject  to  the  joint  and  equal  use  of  both  parties,  their 

63  I.  C.  C. 


I 


584 


INTERSTATE  COMMERCE  COMMISSION  REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


585 


i 


^ 


9 


lessees  or  assigns,  for  a  tenn  of  999  vears,  with  the  option  to  either  party  to  withdraw 
from  its  use  of  any  of  the  terminals  of  the  other  at  anv  time  within  two  years  from 
the  effective  date  hereof,  and  the  maintenance  and  opsrating  expenses  and  taxes 
thereof  shall  be  apportioned  by  agreement  or  by  arbitration.  The  value  of  such 
terminals  when  owned  exclusively  bv  one  party,  and  the  difference  in  the  value 
when  jointly  owned  by  several  parties,  shall  be  ascertained  by  arbitration,  if  the 
parties  hereto  are  unable  to  agree  thereon,  and  a  rental  upon  the  value,  or  the  excess 
value,  as  the  case  may  be,  at  the  rate  of  two  and  one-half  per  cent,  shall  be  paid  for 
the  use  of  such  terminals  bv  the  tenant  company.  The  foregoing  grant  and  provisions 
contained  in  this  section  shall  extend  in  all  respects,  in  favor  of  the  Central  Pacific 
Railway  Company,  to  the  freight  terminals  of  the  Southern  Pacific  Railroad  Company 
and  of  the  Southern  Pacific  Company,  including  roundhouses  and  shop  facilities  for 
light  and  temporary  repairs,  in  tne  City  and  County  of  San  Francisco,  but  not  in- 
cluding shops  or  roundhouses  at  other  points:  and,  in  favor  of  either  the  Southern 
Pacific  Company  and  Southern  Pacific  Railroad  Company  on  the  one  part,  or  the 
Central  Pacific  Railway  Company  on  the  other  part,  to  all  freight  and  passenger 
terminals  at  Oakland,  Oakland  Mole,  Alameda  and  Alameda  Mole,  and  all  femes 
between  Oakland  and  San  Francisco,  and  Oakland  Mole  and  San  P'rancisco,  and 
Alameda  Mole  and  San  Francisco,  and  ferry  slip  and  landings  in  San  Francisco,  and 
the  passenger  buildings  adjacent  thereto,  owned  or  leased  by  the  other  of  said  parties. 
But  the  ownership  and  operation  of  electric  lines,  and  stations  and  terminals  thereon, 
are  to  remain  as  at  present  until  otherwise  disposed  of,  with  an  equitable  apportion- 
ment of  the  earnings  and  expenses  in  the  meantime. 

18.  The  Central  Pacific  Railway  Company  agrees  that  it  will  use  and  employ  its 
shops  and  shop  facilities,  roundhouses  and  other  appurtenances  at  Sacramento, 
Oakland  and  other  points  in  California  for  the  repair  and  maintenance  of  the  engines 
and  cars  and  for  other  shop  work  of  the  Southern  Pacific  Company  and  the  Southern 
Pacific  Railroad  Company  in  the  same  manner  as  it  uses  and  employs  the  same  for 
the  repair  and  maintenance  of  its  own  equipment  and  for  its  own  other  shop  work, 
without  discrimination,  for  five  years  from  the  effective  date  hereof;  the  compensation 
of  said  Central  Pacific  Railway  Company  for  the  repair  and  shop  work  and  shop 
facilities  to  be  fixed  upon  some  equitable  basis,  including  a  return  upon  the  value 
of  the  plant,  and  if  the  parties  are  unable  to  agree  upon  such  compensation  the  same 
shall  be  determined  by  arbitration  as  hereinafter  provided. 

Fifth. 

19  The  Southern  Pacific  Company  hereby  agrees  to  sell,  assign  and  transfer  to 
the  Union  Pacific  Railroad  Company,  and  the  Union  Pacific  Railroad  Company 
hereby  at^rees  to  purchase,  immediately  upon  the  effective  date  of  this  agreement, 
$3  000  000,  face  value,  of  First  Mortgage  Bonds  of  the  Central  California  Railway 
Company,  $1,000,000,  face  value,  of  First  Mortgage  Bonds  of  the  Chico  and  Northern 
Railroad  Company,  $8,500,000  face  value,  of  First  Mortgage  Bonds  of  the  Nevada 
and  California  Railway  Company,  $2,500,000,  face  value,  of  the  First  Mortgage  Bonds 
of  the  Sacramento  Southern  Railroad  Company,  and  $3,084,252.33,  face  value,  of 
Extensions  Purchase  Notes  of  the  Central  Pacific  Railway  Company,  dated  March 
1  1912  now  held  by  the  Southern  Pacific  Company,  for  and  in  consideration  of  the 
payment  by  the  Union  Pacific  Railroad  Company  of  a  sum  equal  to  the  aggregate 
principal  amount  of  said  bonds  and  notes,  together  with  the  accrued  interest  thereon, 
(except  that  the  consideration  for  the  purchase  of  said  First  Mortgage  Bonds  of  the 
Chico  and  Northern  Railroad  Company  shall  be  the  book  cost  thereof  to  the  Southern 
Pacific  Company),  and  the  Southern  Pacific  Company  agrees  to  deliver  to  the  Union 
Pacific  Railroad  Company  the  bonds  and  notes  aforesaid;  and  the  Southern  Pacific 
Company  further  agrees  to  sell,  assign  and  transfer  to  the  Union  Pacific  Railroad 
Company,  and  the  Union  Pacific  Raih-oad  Company  agrees  to  purchase,  at  the  face 
value  thereof  and  accrued  interest,  all  other  indebtedness  of  the  Central  Pacific 
Railway  Company  to  the  Southern  Pacific  Company,  on  account  of  advances  or 
otherwise,  representing  expenditures  for  construction  and  betterments  made  since 
the  29th  day  of  February,  1912,  and  on  account  of  materials  and  supphes  not  paid 
for  out  of  earnings,  in  connections  with  the  lines  of  railroad  formerly  owned  respec- 
tively by  the  Central  California  Railway  Company,  Chico  and  Northern  Railroad 
Company,  Nevada  and  California  Railway  Company,  Sacramento  Southern  Railroad 
Company,  Goose  Lake  and  Southern  Railway  Company,  Fernley  and  Lassen  Railway 
Company  and  Modoc  Northern  Railway  Company,  acquired  by  the  aforesaid,  each 
dated  February  29,  1912. 

63LO.O. 


Supplementary  agreement,  dated  March  Uj  1913  {not  executed). 

Section  4.  That  all  of  the  provisions  contained  in  Sections  13,  14  and  15  of  the 
Original  Agreement  are  hereby  abrogated  and  annulled . 

Section  5.  That  Section  16  of  the  Original  Agreement  is  hereby  modified  and 
amended  by  striking  out  the  following  words  at  the  beginning  of  said  section,  viz: 
"During  the  continuance  of  the  option  rights  in  regard  to  trackage  or  joint  use  or" 

Section  6.  That  all  of  the  provisions  contained  in  Section  17  of  the  Original  Agree- 
ment are  hereby  abrogated  and  annulled. 

Section  7.  That  the  parties  hereto  hereby  agree  upon  the  following  additional 
provisions  to  be  inserted  in  the  Original  Agreement  and  numbered  respectively 
Sections  17-A,  17-B,  and  17-C.  ^    .^ 

Section  17-A.  Prior  to  the  effective  date  of  the  surrender  by  the  Southern  Pacific 
Company  of  the  possession  of  the  railroads  of  the  Central  Pacific  Railway  Company, 
the  Southern  Pacific  Company  and  the  Central  Pacific  Railway  Company  will  file 
with  the  Railroad  Commission  of  the  State  of  California  tariffs,  effective  upon  the 
effective  date  of  such  surrender,. of  joint  rates  and  fares  for  the  transportation  of  freight 
and  passengers  between  all  points  in  the  State  of  California  between  which  the 
Southern  Pacific  Company  had  tariffs  in  effect  on  February  24,  1913,  whether  over 
the  raiboad  lines  of  the  Central  Pacific  Railway  Company  or  other  lines  operated  by 
the  Southern  Pacific  Railway  Company,  which  said  joint  rates  and  fares  shall  not 
exceed  the  rates  and  fares  of  the  Southern  Pacific  Company  between  the  same  points 
on  file  with  the  said  Railroad  Commission  on  said  24th  day  of  February,  1913.  The 
Southern  Pacific  Company  and  the  Central  Pacific  Railway  Company,  respectively, 
will  also  file  with  said  Railroad  Commission,  effective  upon  the  effective  date  of 
such  surrender,  their  tariffs  of  local  rates  and  fares  between  points  within  the  State  of 
California  so  far  as  such  new  tariffs  shall  be  required  by  reason  of  the  altered  conditions 
as  to  the  ownership  and  operation  of  railroad  lines  resulting  from  Original  Agreement 
or  from  this  Supplementary  Agreement,  which  rates  and  fares  shall  not  exceed  the  rates 
and  fares  in  effect  between  said  points  on  the  24th  day  of  February,  1913,  over  the 
lines  then  operated  by  the  Southern  Pacific  Company. 

Section  17-B.  The  Southern  Pacific  Company  intends  to  route  all  interstate  traflSc 
having  origin  or  destination  in  the  State  of  California  at  Santa  Barbara  or  Mojave  or 
points  north  thereof  over  its  lines  via  Los  Angeles,  so  far  as  it  may  be  able  to  secure 
the  routing  of  the  same  via  its  lines,  but  as  to  all  such  traffic,  which  it  cannot  so  secure 
it  hereby  agrees  to  preferentially  solicit  and  route  the  same  via  the  through  routes 
composed  of  its  own  lines  and  the  lines  of  the  Central  Pacific  Railway,  Union  Pacific 
Raiboad  and  Oregon  Short  Line  Railroad  Company  if  not  otherwise  routed  by  the 
shipper  or  consignee.  And  the  Central  Pacific  Railway  Company,  Union  Pacific 
Railroad  Copipany  and  Oregon  Short  Line  Railroad  Company  intend  to  route  all 
interstate  traffic  having  origin  or  destination  in  the  State  of  California  at  Santa  Barbara 
or  Mojave  or  points  north  thereof  over  their  own  lines,  so  far  as  they  or  either  of  them, 
may  be  able  to  secure  the  routing  of  the  same  via  such  lines;  but  as  to  such  traflfic 
which  they,  or  either  of  them,  cannot  so  seciite,  they,  and  each  of  them  hereby  agree 
to  preferentially  solicit  and  route  the  same  via  the  through  routes  composed  of  their 
own  lines  respectively  and  the  lines  of  the  Southern  Pacific  Company  if  not  otherwise 
routed  by  the  shipper  or  consignee. 

Section  17-C.  The  Southern  Pacific  Company  intends  to  route  via  its  own  lines 
all  traffic  having  origin  or  destination  at  points  in  Oregon  so  far  as  it  may  be  able  to 
secure  the  routing  of  the  same  via  its  lines,  but  as  to  all  traflfic  moving  through  the 
Portland  gateway  which  it  cannot  so  secure  it  hereby  agrees  to  preferentially  solicit 
and  route  the  same  via  the  through  routes  composed  of  its  own  lines  and  the  lines 
of  the  Oregon-Washington  Railroad  &  Navigation  Company,  Oregon  Short  Line 
Railroad  Company  and  Union  Pacific  Railroad  Company,  if  not  otherwise  routed  by 
the  shipper  or  consignee,  at  equal  divisions  of  rates. 

And  Union  Pacific  Railroad  Company  and  Oregon  Short  Line  Railroad  Company 
for  themselves  and  as  owners  of  all  the  capital  stock  of  the  Oregon-Washington  Rail- 
road &  Navigation  Company  hereby  agree  to  solicit  and  route  all  traffic  moving  through 
the  Portland  gateway  to  or  from  points  in  the  State  of  Oregon  south  of  Portland  via 
the  through  routes  composed  of  their  own  lines  and  the  lines  of  the  Southern  Pacific 
Company,  if  not  otherwise  routed  by  the  shipper  or  consignee,  at  equal  divisions  r.f 
rates. 

Equally  worthy  of  attention  is  the  objection  to  unmerger  that  it  is  not  desired  either 
by  the  shipping  or  the  general  California  public.  In  other  words,  it  is  alleged,  and 
seems  actually  to  be  a  fact,  that  the  California  authorities,  expressive  of  public  eenti- 

63 1.  C.  C. 


I        • 


1 

I 


i 

If 


I 


ii 


p' 


586 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION  OF  RAILEOADS. 


587 


ipi' 


!  FmRf 


4*       ' 


ment,  still  hold  to  the  view  above  quoted  from  an  opinion  of  the  railroad  commission. 
To  this  view,  as  part  of  a  national  plan,  two  answers  may  be  given.  The  fu^t  has, 
in  fact,  already  been  stated.  It  is  that  disturbance  temporarily  of  established  condi- 
tions, and  perhaps  long-time  prejudice  to  the  conduct  of  strictly  local  business — 
traffic  to  and  fro  from  points  on  the  Pacific  slope — may  be  expected;  but  that  the 
compensating  advantage  of  a  keener  rivalry  for  traffic  with  the  outside  world  may 
ensue.  But  what  about  the  other  motive  in  public  sentiment?  This  concerns  the 
natural  desire  of  state  authorities  and  of  the  California  shipping  public  to  control 
the  local  situation.  So  long  as  the  Central  Pacific  is  a  part  of  the  Southern  Pacific 
system,  a  large  fraction  of  the  lines  jointly  owned  by  both  are  subject  to  the  jurisdic- 
tion of  the  state  of  California.  The  withdrawal  of  the  Central  Pacific  and  transference 
of  ita  ownership  and  management  to  the  Union  Pacific,  which  is  but  slightly  repre- 
sented by  mileage  in  California,  would  materially  lessen  the  weight  in  its  councils 
of  local  opinion  and  authority.  This  is  a  real  objection  from  the  point  of  view  of 
California:  but  it  can  not  be  allowed  to  interfere  with  national  policy.  The  conflict 
of  state  and  federal  government  is  again  in  evidence  at  this  point;  and  it  is  confidently 
believed  that  the  claim  of  the  nation  is  paramount  to  that  of  the  locality.  Dissolu- 
tion, obviously,  if  ever  effected,  must  be  carried  out  with  due  regard  to  this  local 
opinion.  But  it  is  not  believed  that  this  objection  locally  should  be  allowed  to  pre- 
vail. 

Along  with  the  Central  Pacific  lines  there  are  a  considerable  number  of  isolated 
branches.  Those  which  appear  to  belong  to  the  Central  Pacific  are  as  follows;  known 
as  the  Placerville,  lone,  Valley  Springs,  Raymond,  Madera,  and  Oakdale  branches. 
These  are  matters  of  detail,  but  are  instanced  in  order  to  show  the  likelihood  of  a 
decision  being  called  for  in  the  event  of  final  consummation  of  a  consolidation  program. 

Summarizing,  the  resultant  layout  in  California,  after  unmerger  of  the  Central 
Pacific  and  the  Southern  Pacific,  will  leave  the  following  lines  as  depicted  on  map  23 
in  the  Southern  Pacific  system.  The  smaller  map  on  page  576  supray  already  utilized 
in  discussion  of  Central  Pacific  affairs,  shows  it  more  in  detail.  There  will  be  a  through 
line  to  Tehama  and  on  to  Portland,  with  existing  trackage  to  Seattle,  together  with 
the  spur  from  Weed,  This  latter  is  important  as  extending  toward  a  connection 
some  dav  from  the  north  down  the  Deschutes  River.  The  Southern  Pacific  will  also 
have  full  running  rights  from  Brighton,  near  Sacramento,  to  Lathrop,  Niles,  Red- 
wood, and  Oakland,  thus  completing  a  through  line  the  length  of  California  and  into 
San  Francisco.  But  decision  is  reserved  for  further  examination,  as  to  whether  it 
would  cripple  service,  wholly  to  exclude  the  Southern  Pacific  from  the  line  from 
Lathrop  down  the  west  side  of  the  San  Joaquin  Valley  to  a  Southern  Pacific  connec- 
tion again  at  Goshen.  The  important  point  is  that  service  shall  not  be  prejudicially 
affected  by  too  drastic  an  attempt  at  separation.  Cooperative  utilization  under  a 
pooling  arrangement  for  the  two  lines  down  the  San  Joaquin  Valley  would  probably 
suffice.  In  exchange,  the  Southern  Pacific  should  give  full  privileges  to  the  Central 
Pacific  from  Redwood  into  the  San  Francisco  terminals,  together  with  a  grant  of 
equal  running  rights  over  the  Benicia  cut-off  line  from  Sacramento  to  Oakland.  In 
this  cut-off  the  Western  Pacific  should  also  participate. 

What  shall  become  of  the  Southern  Pacific  lines  in  Oregon?  North  of  the  California 
boundary  they  are  separately  incorporated  as  the  Oregon  &  California  Railroad. 
The  location  appears  in  relation  to  the  Southern  Pacific  and  also  to  the  Union  Pacific 
systems  on  maps  15  and  23,  respectively.  The  geographical  circumstances  should  be 
understood .  The  watershed  along  the  summit  of  the  Siskiyou  Range  follows  the  north- 
em  boundary  of  California.  But  the  natural  separation  from  a  transportation  stand- 
point between  the  two  properties  occurs  at  Tehama,  Calif.  This  is  the  head  of  the 
fertile  Sacramento  Valley  and  the  beginning  of  the  canyon  or  bridge  line.  It  is 
stoutly  urged  that  these  lines,  either  north  of  California  or  north  of  Tehama  should  be 

68LC.C. 


transferred  from  the  Southern  Pacific  Company  to  the  Oregon  Short  Line,  thus  also 
forming  part  of  the  Union  Pacific  system.  The  argument  therefor  is  largely  an  operat- 
ing one,  and  there  are  substantial  precedents  for  such  action.  Under  the  Harriman 
regime,  when  all  the  lines  throughout  this  territory  were  corporatively  united  the 
Oregon  &  California  Railroad  was  managed  as  a  part  of  the  Union  Pacific  system. 
A  similar  policy  was  pursued  by  the  federal  Railroad  Administration,  and  the  then 
regional  director  recommends  that  this  policy  be  pursued.  Furthermore,  it  is  repre- 
sented that  public  opinion  along  the  Willamette  Valley,  traversed  by  these  lines, 
strongly  favors  such  segregation.  The  argument  in  all  these  cases  is  that  the  Siskiyou 
Range  is  a  difficult  watershed  to  cross.  The  natural  flow  of  traffic,  it  is  alleged,  is 
down  hill  to  the  north  from  the  CalifOTnia  boundary,  and  thence  out  to  the  east  by  the 
Or^:on  Short  Line;  and,  similarly,  that  southbound  traffic  should  move  toward  San 
Francisco  from  the  frontier.  Complaint  is  cited  of  car  shortages  in  the  Willamette 
r^on,  due  to  this  cause.  It  is  alleged  that  there  is  heavy  tonnage,  lumber  and  the 
like,  out  of  this  territory,  and  that  this  calls  for  a  constant  inward  flow  of  empty  cars. 
The  lumber  loaded  thereon  moves  from  the  Willamette  Valley  either  to  Omaha,  St. 
Paul,  etc.,  or  else  southward  to  California,  Arizona,  and  New  Mexico.  The  empties, 
it  is  alleged,  under  Southern  Pacific  management,  even  for  eastbound  traffic  over  the 
Oregon  Short  Line,  must  climb  over  the  summit  of  the  Union  Pacifio-Central  Pacific 
line,  and  then  up  through  northern  California  and  over  yet  another  high  range  into 
Oregon.  And  inasmuch  as  the  Southern  Pacific  only  enjoys  the  short  haul  on  this 
directly  eastbound  business,  a  consistent  neglect  to  provide  an  adequate  supply  of 
empty  cars  is  alleged.  The  net  effect,  it  is  said,  is  to  discourage  lumber  movement 
to  the  eastern  market,  as  against  the  one  located  along  the  main  Southern  Pacific 
lines.  All  told,  the  gist  of  this  contention  is  that  operating  efficiency  would  be  pro- 
moted were  this  segregation  to  take  place,  and  that  a  broader  lumber  market  would 
also  necessarily  result. 

The  Southern  Pacific  {vigorously  combats  [this  proposal.  A  [heavy  investment, 
of  long  standing,  [has  been  made.  It  is  alleged  that  the  ability  of  the  Southern 
Pacific  to  compete  effectively  in  Oregon  with  the  other  transcontinental  routes  would 
be  destroyed  by  dismemberment.  The  Southern  Pacific  line  through  northern  Cali- 
fornia was  constructed,  it  appears,  with  a  view  to  continuous  operation  through  into 
Oregon;  and  amputation  would  leave  these  lines  in  the  air  at  the  California  boundary. 
A  comprehensive  analysis  of  traffic  on  the  Oregon  lines  is  offered  in  orderjtoshow  that 
the  principal  business  hereabouts  is  north  and  south  rather  than  east  and  west.  Of 
the  total  number  of  passengers  picked  up  on  the  Oregon  lines  over  80  per  cent  are  said 
to  be  ticketed  to  stations  on  the  existing  Southern  Pacific  system.  Less  than  20  per 
cent  of  the  passengers  from  points  on  these  lines  to  other  destinations  are  noted.  Over 
80  per  cent  of  the  carloads  of  freight  are  alleged  to  be  picked  up  or  delivered  at  or  to 
stations  embraced  in  the  present  Southern  Pacific  system.  Certain  other  details  con- 
cerning traffic  are  set  forth  in  the  following  memorandum: 

Four  passenger  trains  in  each  direction  are  operated  daily  between  Portland  and  San  Francisco,  which  now 
nin  over  a  single  system,  that  would  have  to  be  operated  over  two  systems  if  the  Oregon  lines  were  sepa- 
rated from  the  Southern  Pacific.  These  trains  earn  an  average  of  approximately  $4.23  per  train  mile,  which 
earnings  are  not  approached  by  any  East  or  Westbound  transcontinental  train.  They  indicate  the  volume 
of  the  north  and  south  passenger  business. 

Of  the  total  number  of  carloads  of  freight  picked  up  or  delivered  at  points  on  Southern  Pacific  lines  in 
Oregon,  more  than  80%  are  to  or  from  stations  in  Oregon,  California,  Nevada,  Utah,  Arizona  and  New 
Mexico— the  service  bein{f  performed  almost  entirely  by  the  "Ines  embraced  in  existing  Southern  Pacific  System. 

Of  the  total  nimiber  of  carloads  of  freight  picked  up  or  delivered  at  points  on  Southern  Pacific  lines  in 
Oregon,  less  than  20%  originate  at  or  are  destined  to  points  north  and  east  of  Portland,  Ogden  and  El  Paso. 
These  include  all  carloads  to  and  from  American  and  Canadian  Northwest  which  are  delivered  at  Portland 
to  or  by  the  Northern  Pacific,  Great  Northern  and  Chicago,  Milwaukee  &  St.  Paul.  They  include  all  car- 
loads to  and  from  the  Middle  West  and  East  which  are  routed  via  Ogden,  the  Denver  &  Rio  Grande  and 
its  Eastern  connections,  and  all  carloads  which  are  routed  via  El  Paso  and  the  Rock  Island,  as  well  as  the 

63  I.  C.  C. 


I 


I  ? 


I  tf  I    f\ 


688  INTERSTATE   COMMERCE  COMMISSION  REPORTS. 

Texas  Pacific.  They  also  include  all  carloads  from  and  to  points  in  Mexico  served  only  by  the  i-'outhem 
Pacific  Railroad  of  Mexico,  and  all  carloads  routed  via  El  Paso  to  and  from  all  points  in  Louisiana  and 
Texas  (including  points  in  the  Republic  of  Mexico  interchanged  by  Southern  Pacific  at  Rio  Grande  cross- 
ings and  of  carloads  interchanged  with  ocean  lines  at  Gulf  ports)  as  well  as  of  carloads  routed  via  the  steam- 
ship lines  of  the  Southern  Pacific  Company  between  Gulf  ports  and  the  Atlantic  Seaboard— the  diversion 
of  which  would  materially  reduce  the  revenue  of  these  lines  and  the  Southern  Pacific  System  as  a  whole 

This  is  certainly  an  impressive  exhibit,  coupled  with  the  possible  effect  upon 
through  service  of  substituting  two  new  sets  of  terminals  at  junctions  for  the  present 
terminals  at  Portland  and  San  Francisco.  The  only  point  not  successfully  met  is  the 
alleged  effect  upon  the  lumber  mark3t.  The  precise  details  of  administration  under 
the  Harriman  and  federal  r^mes  should  be  analyzed.  The  possibility  even  of  the 
withdrawal  of  through  rates  from  and  to  these  points  via  the  Central  Pacific  route, 
in  order  to  confine  movement  of  the  Oregon  traffic  through  Portland,  must  ba  con- 
sidered .  1 1  seems  preferable  without  detailed  examination  of  these  conflicting  claims 
to  reserve  decision  upon  this  important  matter.  Further  time  for  comparison  of  data 
is  necessary. 

Subsequent  investigation  and  especially  a  comparison  of  earning  power  in  propor- 
tion to  investment  account,  as  shown  on  page  613,  infra,  for  each  of  the  five  competing 
transcontinental  systems,  gives  naming  that  the  Southern  Pacific-Rock  Island  system 
in  order  to  compete  on  evenly-balanced  terms  with  its  neighbors,  despite  its  present 
strength,  must  not  be  too  roughly  handled.  The  accompanying  table  is  significant. 
It  is  a  statement  of  total  tons  passing  through  El  Paso,  Ogden,  and  Portland,  during 
the  period  March  to  November,  1920.  It  shows  how  very  large,  relatively,  is  the  ton- 
nage through  both  the  Ogden  and  the  Portland  gateways  as  compared  with  the  El  Paso 
line. 

Westbound.  Eastbound. 

ViaEl  Paso 802,226tons.  1,046,733 tons. 

Via  Ogden 1,076,395  tons.  1,616,861  tons. 

Via  Portland 571,172tons.  749,557tons. 

'^^^^ 2, 449, 793  tons.  3, 413, 151  tons. 

The  amputation  of  the  Central  Pacific  is  a  real  loss.  By  no  means  all  of  this  tonnage^ 
of  course,  will  desert  the  Southern  Pacific,  but  some  portion  of  it  is  bound  to  be  taken 
away.  Panama  competition  will  certainly  increase,  and  the  roundabout  transconti- 
nental routes  can  hardly  be  expected  to  hold  their  own  unless  afforded  every  encour 
agement.  To  take  away  the  Portland  traffic  also,  or  even  a  goodly  share  of  it,  in  addi- 
tion to  the  loss  of  such  part  of  the  Central  Pacific  traffic  as  \\  ill  be  diverted  by  the  new 
arrangement,  would  be  manifestly  unfair.  This  is  peculiarly  true  in  vie^  of  the 
competitive  strength  of  tha  Union  Pacific  and  the  Burlington  as  disclosed  by  our 
statistical  exhibit  for  1917.  Southern  Pacific  competition  throughout  Oregon  and  up 
into  Washington  should  probably  be  left  undisturbed.  It  is,  tharefora,  finally  recom- 
mended that  these  Oregon  lines  remain  in  the  possession  of  the  Southern  Pacific-Rock 
Island  system.    The  several  maps  are  constructed  upon  this  basis. 

The  broadest  national  interests  invite  attention  to  the  course  of  future  construction 
in  the  great  undeveloped  triangle,  with  its  western  base  on  Portland-Sacramento  and 
its  apex  at  Salt  Lake  City.  Tliis  great  domain,  bounded  on  the  west  and  south  by 
the  Southern  Pacific  lines,  and  on  the  north  by  the  Oregon  Short  Line,  was  apparently 
marked  by  the  late  E.  H.  Harriman  ^  for  exclusive  development,  upon  acquisition 
by  the  Union  Pacific  of  the  Soutliem  Pacific  in  1901.  Then  came  the  invasion  from 
the  north  by  the  Hill  interests,  which  projected  a  line  down  the  Deschutes  River, 
evidently  headed  toward  San  Francisco.  Harriman  retaliated  by  the  Columbia  River 
construction,  entered  Seattle,  and  immediately  proceeded  to  parallel  the  Deschutes 
River  line.  His  plans  contemplated  a  line  (dotted  on  map  15)  from  Ontario  on  the 
eastern  boundary  straight  across  southern  Oregon  to  Crescent  Lake,  near  which  a  junc- 

*  Cf.  Commissioner  Lane's  report  and  map,  12 1.  C.  C,  277 

63 1.  C.  C. 


CONSOLIDATION   OF  RAILROADS. 


589 


tion  would  be  effected  with  the  line  down  the  Deschutes  River.  The  natural  con- 
tinuation of  this  line  to  the  west  would  then  come  out  at  Eugene,  Oreg.,  on  the  San 
Francisco-Portland  main  line.  This  construction  was  lialted  by  the  federal  dissolu- 
tion suits.  For,  obviously,  there  was  danger  that,  if  built,  the  line  might  go  to  a  rival 
company.  From  a  national  point  of  view,  the  important  line,  strategically,  is  the 
continuation  of  the  north-and-south  Deschutes  River  line  to  complete  another  route 
between  the  Columbia  River  and  California.  This  project  is  the  so-called  Oregon 
Trunk  Railway.  It  would  come  out  at  the  southern  end  by  Klamath  Falls,  and  so 
on  to  a  connection  at  Weed  witlf  the  Southern  Pacific  at  San  Francisco.  The  larger 
significance  of  this  project  is  that  it  would  provide  the  Pacific  coast  with  at  least  two 
through  lines  of  railway  to  connect  California  and  Washington.  Southern  California 
has  three  railroads  north  and  south,  parallel  to  the  coast.  Northern  California  and 
Oregon,  at  the  narrowest  point  in  Oregon,  have  only  one  complete  through  line.  Two 
roads  are  built  part  way;  but  from  Tehama  to  Eugene  there  is  but  a  tenuous  line  of 
communication.  A  trestle  blown  up,  or  a  tunnel  wrecked,  in  time  of  war  would  com- 
pel military  communication  to  take  place  by  encircling  the  entire  huge  triangle 
east  to  the  Great  Salt  Lake.  The  need  of  such  another  interior  north-and-south  line 
of  communication  was  clearly  demonstrated  in  the  late  war.  North,  in  Washington, 
the  military  necessities  are  adequately  covered.  Complete  protection  would  not  be 
afforded,  however,  merely  by  effecting  a  junction  of  the  Oregon  Trunk  Railway  into 
Weed.  Tliere  would  still  be  a  little  stretch  in  northern  California  with  but  a  single 
line  of  communication.  The  program  ultimately  necessary  for  completion  of  an  entire 
interior  line  of  communication  should  be  the  reconstruction  of  the  Nevada-California 
Oregon  Railway  (map  16)  from  Reno,  Nev.,  north,  acquired  by  the  Western  Pacific 
in  1917;  bringing  it  to  standard  gauge;  and  then  completing  it  to  a  connecticn  from 
the  north  with  the  Deschutes  line.  Thus  would  be  provided  a  military  detour  route 
wliich  might  be  of  great  importance  in  time  of  need. 

The  only  foreshadowing  conclusion  which  may  be  ventured  as  to  the  great  unde- 
veloped area  in  and  about  southern  Oregon,  is  that  it  probably  ought  to  fall  rather 
under  the  control  of  the  Union  Pacific  and  Burlington-Northern  Pacific  systems,  than 
that  it  should  be  developed  by  the  St.  Paul-Great  Northern  system.  The  extension 
southward  of  this  last  system  has  hardly  the  justification  which  attaches  to  an  attempt 
of  either  of  the  other  great  systems  to  unite  the  western  ends  of  their  transcontinental 
stems  to  Seattle  and  San  Francisco,  respectivel^^  Unless  indeed,  viewing  the  matter 
still  more  broadly,  it  should  be  held  desirable  that  at  some  future  time  the  St.  Paul- 
Great  Northern  system  should  reach  San  Francisco  by  rail  from  the  north,  just  as  the 
two  great  southwestern  transcontinental  systems  attain  it  from  the  south.  Then, 
indeed,  the  scheme  for  evenly  balanced  competition  all  round,  would  be  complete. 
But  it  is  yet  a  long  way  from  the  railhead  of  the  Oregon  Trunk  Railway  down  the 
Deschutes  River  to  San  Francisco.  Rather  does  it  seem  desirable  that  the  interior 
north-and-south  line  should  be  pushed  up  from  the  Western  Pacific  at  Reno,  and 
perliaps  down  from  the  north  by  a  line  down  the  Deschutes  River  under  Northern 
Pacific  auspices,  to  effect  the  junction. 

The  foregoing  projects  for  penetrating  the  great  undeveloped  area  in  southern 
Oregon  manifest  a  keen  competition  between  all  of  the  great  interests.  The  Union 
Pacific  is  intruding  from  the  east;  the  Southern  Pacific  (Oregon  &  California  Railroad) 
is  coming  in  from  the  west;  the  Hill  and  Union  Pacific  lines  follow  the  Willamette 
and  Deschutes  rivers  down  from  the  north;  while  from  +he  south,  at  Reno,  the  Western 
Pacific  (Burlington-Northern  Pacific,  under  this  plan)  and  the  Southern  Pacific  by 
Klamath  Lake,  are  pressing  forward  to  effect  a  junction  in  the  interior.  Shall  zones 
of  influence  be  laid  out  in  advance,  or  is  the  wiser  course  to  encourage  construction 
by  a  grant  of  wide  latitude?    The  issue  is  bound  to  arise  upon  application  for  further 

63 1.  C.  C. 


590 


INTERSTATE  COMMERCE   COMMISSION  REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


591 


<    j 


construction.  But  at  this  time  it  is  re-ommended  that  no  general  policy  as  to  control 
be  foreshadowed .  Ultimately,  of  course,  it  is  to  be  hoped  that  the  great  systems  reach« 
ing  the  coast  in  Washington  and  California,  respectively,  shall  be  linked  up  by  north- 
and-south  connecting  lines.  But  as  yet  it  seems  too  early  to  declare  just  which  lines 
shall  be  elected  for  that  purpose.  This  plan  contents  itself,  therefore,  merely  with 
emphasizing  the  national  interest  in  the  completion  of  an  interior  line  of  communica- 
tion parallel  to  the  coast,  reserving  details  for  future  consideration. 

What  bounds  shall  be  set  to  the  zone  of  influence  of  the  Oregon  Short  Line  in  the 
northwest,  in  order  to  balance  up  conditions?  Shall  the  Union  Pacific  system  con- 
tinue to  extend  from  Portland  north  into  Seattle,  by  means  of  the  existing  trackage 
contract  with  the  Northern  Pacific?  When  the  Oregon  Short  Line  competes  at 
Seattle  with  the  Great  Northem-St.  Paul  system,  it  must  do  so  for  the  same  trans- 
continental through  rate  as  at  Portland,  although  there  is  a  lateral  haul  of  150  miles 
without  compensation.  This  looks  like  a  premium  set  upon  roundabout  haulage. 
But,  on  the  other  liand,  under  the  new  conditions  set  up  by  this  plan,  the  Burlington- 
Northern  Pacific  combination,  set  up  as  a  counterpoise  to  the  Union  Pacific,  will 
be  left  unbalanced  against  it  at  Seattle  unless  the  Union  Pacific  is  also  admitted. 
It  would  appear  as  if  an  equipoise  would  best  be  promoted  by  continuation  of  the 
existing  trackage  riglits  to  the  Oregon  Short  Line  into  Seattle,  coupling  this  with 
such  an  adjustment  of  rates  as  to  discourage  roundabout  hauling.  The  activities 
of  the  Union  Pacific  in  the  northwest  ought  not  fairly  to  be  circumscribed  short  of 
the  same  competitive  opportunities  wliich  attach  to  its  great  rival,  the  Buriington- 
Northern  Pacific.  To  drive  the  Union  Pacific  entirely  out  of  Seattle,  while  also 
not  giving  it  the  Oregon  lines  of  the  Soutliern  Pacific,  would  manifestly  constitute 
most  unfair  discrimination.  Tlie  desirability  of  balancing  conditions  in  the  north- 
west in  this  manner  constitutes  an  additional  reason  to  those  already  cited,  for  the 
transfer  of  the  Southern  Pacific  lines  in  Oregon  to  its  system,  the  point  upon  which 
final  derision  was  however  rendered  in  the  negative. 

It  would  doubtless  contribute  to  more  effective  operation  of  the  Union  Pacific 
system  as  well  as  to  promote  competition,  were  full  and  equal  trackage  rights  to  be 
accorded  by  the  Colorado  &  Southern  Railroad  from  Orin  Junction,  Wyo.,  south  to 
Cheyenne.  Duplication  of  the  line  is  apparently  unnecessary  at  the  present  time. 
To  the  same  end  there  ought  to  be  trackage  on  the  Burlington  line  (compare  map 
16)  from  Pratt,  the  end  of  a  Union  Pacific  stub,  also  up  to  Orin  Junction.  Thus 
again  it  would  appear  as  if  more  effective  operation  might  be  promoted  without 
the  necessity  of  duplication  of  an  existing  line. 

The  Union  Pacific  Railroad  has  a  substantial  investment  in  the  Chicago  &  Alton. 
For  a  decade,  to  1919,  it  has  held  110,343,100  par  value  of  the  preferred  stock  of  this 
road.  And  in  1912,  in  order  to  further  safeguard  this  investment  by  financing  the 
needs  of  the  Alton,  the  Union  Pacific  Raih-oad  acquired  one-half  of  a  substantial 
amount  of  its  general-mortgage  bonds.  Subsequently  additional  bonds  were  taken, 
the  aggregate  in  1919  being  upwards  of  $8,000,000.  It  is  recommended  that  tliis 
control  be  transferred,  as  elsewhere  set  forth,  to  the  Gulf  system  of  the  St.  Louis- 
San  Francisco  system  (page  627,  infra),  in  order  to  afford  a  direct  entrance  into  Chicago. 

The  Chicago,  Burlington  &  Quincy  Railroad  has  been  selected  as  the  Chicago 
connection  for  the  Northern  Pacific  and  also  as  the  main  stem  of  the  second  trans- 
continental line  set  up  for  competition  with  the  powerful  Union  Pacific-Chicago  & 
North  Western  combination .  The  reasons ,  based  upon  both  the  broadest  consid era  tion 
of  western  transcontinental  conditions  and  of  local  situation  in  the  northwest,  have 
been  already  set  forth.  It  is  next  in  order  to  develop  the  necessary  relationships 
within  this  great  system,  which  ramifies  throughout  the  far  west  almost  as  broadly 
as  its  great  competitor.    The  geographical  location  is  shown  in  detail  by  map  16.    As 

63 1.  C.  C 


to  the  northwest,  the  justification  for  alliance  with  the  Northern  Pacific  appears  in 
the  two  routes  across  Wyoming  to  Billings,  Mont.  The  traffic  interchange  with  the 
Burlington  at  this  point,  although  the  Great  Northern  comes  down  directly  through 
Great  Falls,  Mont.,  is  very  heavily  in  favor  of  the  Northern  Pacific  as  against  th*- 
Great  Northern.  The  course  of  this  interchange  since  1896  is  manifested  by  the 
accompanying  table  of  interchange  of  freight  traffic  at  Billings.  From  this  it  appears 
that  the  Burlington  received  from  the  Northern  Pacific  in  1919  much  more  than 
double  the  tonnage  received  from  the  Great  Northern,  and  that  it  delivered  to  the 
Northern  Pacific  almost  three  times  as  much  traffic  as  to  the  Great  Northern.  Ton- 
nage is  stated  in  tons  of  2,000  pounds. 


Year. 


1896. 
1897. 
1898. 
1899. 
1900. 
1901. 
1902. 
1903- 
1904. 
1905. 
1906. 
1907. 


Received  by  Chicago,  Bur- 
lington &  Quincy  from— 


Great     Northern 
Northern.    Pacific. 


Total. 


Tons. 


1908 

» 23, 514 

1909 

168,957 

J910 

228, 644 

1911 

202, 516 

1912 

213,290 

1913 

197, 17S 

1914 

205,672 

1915 

277,036 

1916 

303,925 

1917 

310,651 

1918 

354,493 

1919 

392,023 

Tom. 

86,994 
137,610 
122,202 
140, 742 
172. 512 
261,630 
339,354 
341, 118 
366, 135 
476, 720 
528, 034 
513,900 
463,092 
482,473 
481,956 
394,469 
406,240 
422,411 
420, 224 
494, 129 
698,490 
871,941 
803,473 
961,887 


Tons. 
86,994 
137,610 
122,202 
140,742 
172,512 
261,630 
339,354 
341, 118 
386, 135 
476,720 
528, 034 
513,900 
486,608 
651,430 
710,610 
598, 985 
619,530 
619,589 
625, 896 
771, 165 
1,005,415 
1,182,592 
1, 157, 966 
1,353,910 


Delivered  by  Chicago,  Bur- 
lington &  Quincy  to — 


Great     i  Northern 
Northern.    Pacific. 


Tons. 


U,907 
97,912 
152, 793 
ISO,  891 
170,472 
206,308 
155,331 
185, 104 
318, 177 
424, 638 
293, 565 
229,698 


Tons. 

22,071 

43,014 

55, 735 

66,704 

76, 178 

93,  i93 

lO;-*,  505 

146, 263 

167, 159 

273,892 

369,9Si7 

499,273 

345,098 

389, 561 

439,437 

265,286 

311,482 

375, 242 

310,389 

358,610 

577, 756 

674,366 

637,853 

636,954 


Total. 


Tons. 

22,071 

43,014 

55,735 

66,704 

72, 178 

93, 593 

108, 505 

146,263 

167, 159 

273, 892 

369,987 

599,273 

350,005 

487, 473 

592, 230 

440,157 

481,954 

581,550 

465, 720 

I     543, 714 

I     875,933 

11,099,004 

I     931,418 

866,652 


Total  interchange. 


Great 
Northern 


Tons. 


Northern 
Pacific. 


128,421 
266,869 
381,437 
383, 407 
383,762 
403,486 
361,003 
462,140 
625, 102 
735, 289 
648, 058 
621,721 


1, 


Ton<(. 

109,065 

180,624 

177,937 

207,406 

244,690 

355,223 

447,859 

487,381 

533,294 

759,612 

898,021 

113, 173 

808,190 

872,034 

921,403 

659,735 

717, 722 

797,653 

739,613 

852,739 

256,246 

546,307 

441,326 

598,841 


Total. 


TonJi. 

109,085 

180,624 

177,937 

'207,406 

244,690 

355,223 

447,859 

487,381 

533,294 

750,612 

898, 021 

1, 113, 173 

836,611 

1,138,903 

1,302,840 

1,043,142 

1,101,484 

1,201,139 

1,091,611 

1,314,879 

1,881,341 

2,281,596 

2, 089, 384 

2, 220, 562 


'  Connection  with  the  Great  Northern  was  completed  October,  1933. 


There  can  be  no  doubt  as  to  the  course  of  this  natural  current  of  traffic  to  the  north- 
west. These  two  routes  are  a  competitive  counterpart  for  the  Oregon  Short  Line 
in  the  other  great  rival  Union  Pacific  system. 

The  Colorado  situation  must  be  examined  in  detail.  At  present  the  Burlington 
route  to  the  Pacific  coast  by  way  of  the  Denver  &  Rio  Grande  at  Pueblo,  is  most 
indirect.  Of  the  six  lines  into  the  Denver  district,  shown  on  map  14,  it  is  one  of  the 
most  roundabout.  Three  others  leading  to  Colorado  Springs  or  Pueblo  direct  are 
shorter.  But  the  choice  under  this  plan  is  made  not  for  the  immediate  present,  but 
as  part  of  a  national  policy  for  the  future.  The  bulwark  of  the  Rocky  Mountains 
behind  Denver  is  bound  to  be  overcome  before  long  by  the  construction  of  a  penetrat- 
ing direct  line  toward  Salt  Lake  City.  The  need  of  such  provision  of  a  through  route 
is  imperative,  not  only  for  the  upbuilding  of  Denver,  but  for  the  satisfaction  of  national 
commercial  needs.  It  is  not  alone  that  the  roundabout  twist  by  way  of  Pueblo  is  a 
waste  of  distance.  The  route  through  by  Pueblo,  by  reason  of  physical  obstacles  of 
grade  and  curvature,  can  never  be  brought  to  first-class  transcontinental  standards. 
It  is  probably  in  order  to  supply  this  need  that  the  Denver  &  Salt  Lake  City  project 
has  been  so  persistent,  in  the  face  of  seemingly  insuperable  obstacles.  Its  location 
as  a  short  cut  west  of  Denver  is  shown  by  a  distinctive  designation  on  map  16.    The 

68Laa 


«f^ 


592 


IXTERSTATE   COMMERCE   COMMISSION    REPORTS. 


CONSOLIDATION  OF  RAILROADS. 


593 


M^^ 


i 


original  project  for  a  through  line  to  Salt  Lake  City  follows  the  river  course  out  through 
the  northwestern  comer  of  Colorado.  But  it  is  said  to  be  feasible,  by  a  short  and  not 
difficult  piece  of  construction,  to  leave  the  Denver  &  Salt  Lake  at  McCoy,  by  the  dotted 
line  on  the  map  and  to  reach  the  Denver  &  Rio  Grande  at  Dotsero,  Colo.  Thus  the 
most  difficult  portions  of  the  Denver  &  Rio  Grande  line  are  avoided.  The  heavy 
grades  at  Tennessee  Pass  and  Palmer  Lake  would  be  eliminated.  By  a  short  con- 
struction of  40  miles,  the  roundabout  route  by  way  of  Pueblo  would  be  reduced  by 
175  miles.  The  remainder  of  the  Denver  &  Rio  Grande  on  to  Salt  Lake  City  is  almost 
all  water  grade  and  could  readily  be  fitted  to  carry  the  Burlington  load  of  traffic. 

But  the  Denver  &  Salt  Lake  Railroad  itself  is  a  formidable  project,  especially 
where  it  cuts  through  the  continental  divide  by  the  proposed  James  Peak  tunnel. 
At  present  its  grades  and  curvatures  are  prohibitive.  In  1913  the  Denver  tunnel 
commission  estimated  a  cost  of  $4,420,000  and  a  necessarj^  period  of  construction  of 
possibly  five  years.  The  city  of  Denver  authorized  $3,000,000  of  bonds,  but  the 
Colorado  supreme  court  in  1914  declared  the  authorization  to  be  illegal.  Since  that 
time  nothing  has  been  accomplished,  although  a  referendum  vote  in  1920  rejected 
the  project  as  a  mimicipal  enterprise  by  a  narrow  margin.  It  seems  quite 
possible  that  with  strong  financial  support,  and  the  promised  traflic  which  could  be 
guaranteed  by  a  great  system,  a  combination  of  public  and  private  enterprise  might 
bring  the  project  to  fruition.  Thus  might  the  great  investment  in  an  admirable  new 
trunk  line  west  of  Denver  to  a  junction  at  Salt  Lake  City  with  the  Western  Pacific 
be  made  available  as  a  national  asset.  The  Western  Pacific  with  its  most  favorable 
grade  and  curvature,  rising  only  5  000  feet  in  altitude  by  1  per  cent  grades,  while  the 
Central  Pacific  rises  to  7,000  feet,  is  only  80  miles  longer  between  San  Francisco  and 
Salt  Lake  City.  With  the  pending  reorganization  of  the  Denver  &  Rio  Grande  com- 
petently put  through,  and  the  credit  of  a  great  system  and  of  the  Colorado  public 
jointly  employed,  the  Western  Pacific,  the  Denver  &  Rio  Grande,  and  the  Burhngton 
might  readily  become  a  first-class  transcontinental  route.  It  would  thus  match  up, 
as  already  shown,  with  the  Union  Pacific  combination. 

The  only  other  treatment  for  the  Colorado  situation,  and  one  which  rather  tem- 
porizes with  existing  conditions  than  boldly  proceeds  to  build  for  the  future,  would 
be  to  link  the  Denver  &  Rio  Grande  and  Western  Pacific  with  either  the  Santa  Fe 
line  into  Pueblo,  or  the  Rock  I  si  and- Southern  Pacific  combination  into  Colorado 
Springs,    Financially  the  Missouri  Pacific  is  incompetent  to  afford  the  necessary 
strength.    But  to  link  this  second  transcontinental  route  through  the  Denver  and 
Salt  Lake  City  openings  with  either  of  the  two  transcontinental  routes  by  way  of 
Arizona  and  New  Mexico,  would,  as  we  have  seen,  completely  distort  the  balance 
of  power  which  i  t  is  sought  by  this  proposal  to  set  up.    To  permit  the  Southern  Pacific , 
retaining  hold  on  the  Central  Pacific,  to  combine  with  the  Rock  Island  would  threaten 
disastrously  the  Union  Pacific  system.    And  to  give  the  Western  Pacific  route  to  the 
Southern  Pacific-Rock  Island  combination,  would  leave  the  Union  Pacific-North 
Western  powerful  combination  without  a  peer  in  Washington  and  Oregon.    To 
recapitulate,  therefore,  the  grand  strate^  is  to  produce  a  combination  which  shall 
cover  California.  Washington,  and  Ore2fon  with  a  competitive  and  financial  power 
equivalent  to  that  of  the  Union  Pa-^ific  group.    This  consideration  forces  the  alliance 
set  forth  in  this  general  plan. 

The  question  of  terminals  at  San  Francisco  and  of  California  feeders  for  the  Western 
Pacific  is  a  complicated  one.  It  depends  somewhat  upon  the  treatment  of  the  Central 
Pacific  and  of  the  Santa  Fe.  Feeders  will  doubtless  come  in  time.  But  obviously  a 
line  to  the  coast  is  of  no  use  without  adequate  approaches  to  the  water  front  at  once. 
The  joint  use  of  essential  facilities,  which  was  insisted  upon  by  the  California  rail- 
road commission  in  1914  at  the  time  of  the  proposed  separation  of  the  Central  Pacific 

63 1.  C.  C. 


from  the  Southern  Pacific,  ought  to  be  upheld  and  developed.  This  matter  is  dis- 
(nissed  more  fully  in  connection  with  Central  Pacific  affairs,  but  it  is  also  a  general 
terminal  question,  worthy  of  detailed  examination  as  part  of  a  national  program. 

An  outstanding  characteristic  of  the  Biwlington-Northem  Pacific  system  is  the  lack 
of  connection  between  the  twin  cities  and  the  Missouri  River  gateways.  Confirmation 
of  this  is  afforded  by  map  16.  As  already  described,  the  St.  Paul  division,  up  the 
Mississippi  Valley,  is  as  isolated  from  the  rest  of  the  system  as  is  the  thumb  of  a  hand 
from  the  fingers.  It  seems  desirable  to  bridge  this  gap.  For  this  purpose  it  is  recom- 
mended that  the  Chicago  Great  Western  be  merged  with  this  group.  The  distances 
by  various  routes  across  this  territory  appear  in  the  accompanying  table. 

Omaha  to  St.  Paul  via— 

Chicago  Great  Western 346.1  miles. 

Illinois  Central— Fort  Dodge— Minneapolis  &  St.  Louis .'. 365.8  miles. 

Chicago,  St.  Paul,  Minneapolis*  Omaha 390.0 miles. 

Chicago,  Rock  Island  &  Pacific 403.1  miles. 

Chicago,  Milwaukee  &  St.  Paul 456.9  miles. 

Chicago.  Burlington  &  Quincy— Sioux  City— Great  Northern 466.5  miles. 

Chicago,  Burlington  &  Quincy 718.5  miles. 

Kansas  City  to  St.  Paul  via— 

Chicago,  Rock  Island  &  Pacific 482.5  miles. 

Chicago  G  reat  Western 529.0  miles. 

Wabash— Albia— Minneapolis  &  St.  Louis 578.9  miles. 

Missouri  Pacific— Omaha— Chicago,  St.  Paul,  Minneapolis  —  Omaha 594.0  miles. 

Chicago,  Minneapolis  &  St.  Paul 599.4  miles. 

Chicago,  Burlington  &  Quincy— Sioux  City— Great  Northern 645.8  miles. 

Chicago,  Burlington  &  Quincy 713.1  miles. 

The  Chicago  Great  Western  is  by  far  the  shortest  line  between  Omaha  and  St.  Paul; 
and  between  Kansas  City  and  St.  Paul  it  stands  second  upon  the  list;  whereas  the 
Burlington  is  one  of  the  most  roundabout  in  each  instance.  The  Great  Western  and 
the  Rock  Island  alone  operate  through  passenger  trains  between  Omaha  and  Kansas 
City  and  the  twin  cities.  Furthermore,  the  Chicago  Great  Western  line  from  St. 
Paid  to  Chicago  in  future  years  may  well  serve  as  a  detour  route  or  as  a  supplementary 
means  of  relieving  congestion  on  the  main  line.  The  St.  Paul-Great  Northern  has  two 
trunks,  and  this  arrangement  gives  its  competitor  through  the  twin  cities  an  equiva- 
lent advantage  in  operation.  The  only  part  of  the  Chicago  Great  Western  which  is 
superfluous  to  the  Burlington  system  lies  between  Des  Moines  and  Kansas  City. 
There  is  here,  unquestionably,  duplication.  This  di\ision,  however,  admirably 
supplies  a  need  in  the  Union  Pacific-North  Western  system,  as  map  15  discloses, 
(page  575  infra).  In  fact,  without  this  addition  this  latter  system  lacks  entirely  a 
Kansas  City-St.  Paul  direct  route.  This  recommendation  as  to  the  Great  Western 
is  conditioned,  however,  upon  its  drastic  reorganization,  financially.  With  a  book 
investment  in  road  and  equipment  for  1917  of  $119,825  per  mile  of  line,  it  is  little 
wonder  that  the  percentage  of  net  operating  income  to  investment  is  only  1.75.  The 
net  operating  income  per  mile  of  Une,  $1,974,  is  low,  to  be  siu-e;  but  as  an  operating 
property  provided  with  powerful  connections  to  give  it  business,  it  might  cease  to  be  a 
disturbing  factor  in  the  western  railroad  situation  within  an  amplified  Burlington- 
Northern  Pacific  system.  . 
The  Minneapolis  &  St.  Louis  may  also  find  a  fitting  employment  in  completing 
the  supplementary  lines  in  the  Burlington  system,  along  with  the  Chicago  Great 
Western.  Its  relation  thereto  is  also  shown  on  map  16.  The  line  of  the  Minneapolis 
&  St.  Louis,  west  through  South  Dakota,  being  connected  up  along  the  Missouri 
River  Valley  with  the  not-distant  Northern  Pacific  lines,  might  afford  another  short 
cut  across  country  toward  Chicago,  thus  avoiding  congestion  at  the  twin  cities.  The 
missing  hnk  for  such  a  route  is  supplied  by  the  Rock  Island  lines  in  Minnesota  and 

63 1.  C.  C. 


I 


s 


y  ii 


I 


594 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


South  Dakota.    These  lines,  as  shown  by  map  24,  are  of  httle  use  to  the  Rock  Island 
system,  the  destiny  of  which  abides  in  the  southwest.    They  lie  outside  its  natural 
territory.    But  by  a  short  trackage  west  of  Estherville,  Iowa,  a  route  would  be  com- 
pleted clear  through  from  Watertown,  S.  Dak.,  to  Des  Moines  and  down  to  the  Peoria 
gateway.    This  Peoria  gateway  division  is  one  of  the  main  elements  of  strength  in  the 
MinneapoUs  &  St.  Louis  line.    At  the  extreme  lower  end,  there  is  dupHcation  with 
existing  BurUngton  lines;  but  from  the  Missiasippi  River  crossing,  straight  up  through 
to  Bismarck,  N.  Dak.,  it  appears  as  if  these  rails  might  be  more  profitably  employed 
to  feed  the  grain  of  that  territory  down  to  trunk  line  or  southern  connections  than 
under  their  present  utilization.    There  is,  however,  one  break  in  this  cut-off  which 
needs  to  be  bridged  within  the  present  MinneapoUs  &  St.  Louis  system.      West  of 
Fort  Dodge.  Iowa,  a  little  bit  of  Illinois  Central  trackage  would  afford  a  connection 
with  the  western  Minneapolis  A  St.  Louis  line,  and  then  southeast  of  Fort  Dodge  22 
miles  of  new  construction  to  Story  City  would  there  piece  on  again  to  a  branch  leading 
directly  into  Marshalltown,  Iowa.    Or,  in  lieu  of  this,  the  missing  link  might  be  sup- 
plied throughout  by  trackage  on  the  Illinois  Central  and  Chicago  &  North  Western 
rails  between  the  same  points.    In  either  case  a  complete  new  through  line  down  to 
Peoria,  entirely  within  the  proposed  BurUngton  system,  would  result.    Fortunately 
there  is  a  way  to  avoid  useless  dupUcation  by  still  further  partition.    Between  Des 
Moines  and  Oskaloosa,  Iowa,  (map  16)  the  MinneapoUs  &  St.  Louis  merely  uses  track- 
age.   It  is  from  Oskaloosa  on  to  Peoria  that  this  Une  pierces  the  very  bowels  of  the 
present  BurUngton  system.    But  consideration  of  map  15  demonstrates  that  this 
Peoria  division  admirably  builds  into  the  Union  Pacific-North  Western  system, 
which  lacks  just  such  an  inlet  to  the  Peoria  gateway.    It  is  alleged  that  a  better  pro- 
vision of  station  faciUties  at  Marshalltown  will  also  be  afforded  by  such  a  transfer. 
In  this  same  connection  it  will  be  recalled  (page  599  infra)  that  one  further  subtraction 
is  made  from  the  MinneapoUs  &  St.  Louis.    This  is  the  taking  of  the  road  from  Mason 
City,  Iowa,  south  to  Albia  for  the  St.  Paul-Great  Northern  system,  in  order  to  give  it 
a  through  Une  from  the  twin  cities  to  St.  Louis.    Thus  by  means  of  these  detailed 
assignments  the  MinneapoUs  &  St.  Louis,  which  has  in  the  past  suffered  from  dearth 
of  traffic  and  connections,  but  which  possesses  many  attributes  of  strength,  if  properly 
Unked  up,  may  find  stable  lodgment  as  an  element  in  the  larger  systems. 

The  Great  Falls,  Mont.,  industrial  district  is  one  of  present  and  growing  importance. 
Probably  more  tonnage  originates  there  than  from  the  whole  stretch  of  local  points 
west  of  BilUngs.  It  will  be  recalled  that  it  was  the  preservation  of  competition  at 
these  local  stations  which  in  part  affected  the  decision  to  ally  the  Great  Northern 
with  the  St.  Paul  road,  rather  than  to  take  the  Northern  Pacific.  But  a  comparison 
of  maps  16  and  17  brings  out  the  fact  that  this  particular  choice  combines  two  rail- 
roads, the  Great  Northern  and  the  St.  Paul,  each  of  which  enters  Great  Falls,  whereas 
the  Northern  Pacific,  standing  alone,  does  not  approach  it.  The  requirement  of  the 
statute  as  to  competition  certainly  demands  that  this  situation  be  met.  How,  then, 
shall  the  Northern  Pacific  be  admitted  to  the  Great  Falls  district?  The  St.  Paul- 
Great  Northern  system,  according  to  map  17,  has  four  other  Unes  in,  two  of  them  from 
the  south,  on  or  near  the  Une  of  the  Northern  Pacific,  at  Buigoyne  and  Butte  respect- 
ively. To  avoid  unnecessary  dupUcation,  it  would  appear  as  if  trackage  might  be 
granted  to  the  Northern  Pacific  over  one  of  these  approaches.  It  is  recommended 
that  this  be  done,  and  it  is  so  indicated  on  map  16. 

The  Mobile  &  Ohio  Railroad  might  conceivably  be  consolidated  with  the  Buriington 
system  in  order  to  afford  a  direct  outlet  to  the  Gulf  of  Mexico  at  Mobile  as  part  of  a 
national  policy  of  encouragement  of  foreign  trade  routes  through  these  new  outlets. 
The  location  of  the  line  is  shown  on  map  10,  and  in  the  chapter  on  the  southeastern 
railways  the  relation  of  this  property  to  the  Southern  Railway  system  is  described. 
In  its  present  connection  and  ownership  it  is  largely  a  useless  appendage.    In  order 

63I.C.C. 


CONSOLIDATION   OF  RAILROADS. 


595 


to  satisfy  a  similar  need  for  a  Gulf  outlet  in  future  years,  the  Burlington  purchased 
control  of  the  Colorado  &  Southern  in  1908.  And  by  a  joint  arrangement  with  the 
Rock  Island  system  it  was  expected  that  the  Trinity  &  Brazos  Valley  Railroad  would 
carry  the  line  on  to  Galveston.  The  utilization  of  this  latter  route  has  been  somewhat 
disappointing;  but,  nevertheless,  the  extraordinary  growth  of  the  port  of  Galveston 
proves  that  roads  following  these  directions  constitute  natural  currents  of  commerce. 
The  Union  Pacific  system  in  turn  controls  the  lUinois  Central  and  through  it  a  line 
via  the  Central  of  Georgia  to  Savannah,  thus  enjoying  a  double  outlet  through  southern 
ports.  Might  not  the  Burlington-Northern  Pacific  system,  likewise,  amplified  through 
Iowa,  Minnesota,  and  South  Dakota  by  the  incorporation  of  the  railroads  as  above 
described  in  the  aggregate  offer  a  tonnage  at  St.  Louis  which  would  substantially 
build  up  the  Mobile  &  Ohio  and  its  port  on  the  Gulf  of  Mexico.  The  line  under  present 
ownership  yields  no  profit  and  the  project  of  its  transfer  is  worth  consideration.  No 
positive  recommendation  to  this  effect  is  made,  however,  because  of  the  risk  of  up- 
setting a  nice  balance  of  power,  through  so  formidable  a  projection  of  another  north- 
western system  beyond  its  natural  gateways. 

Many  aspects  of  Chicago,  Milwaukee  &  St.  Paul  business  have  already  been  dis- 
cussed in  connection  with  the  general  railroad  alignment  through  the  twin  cities. 
But  there  are  certain  other  matters  peculiar  individuaUy  to  the  St.  Paul-Great 
Northern  system  which  deserve  attention.    The  first  is  the  need  of  strengthening  this 
combination,  in  face  of  the  formidable  competition  which  is  set  up  through  constitution 
of  the  Union  Pacific-North  Western  and  Burlington-Northern  Pacific  groups.    Statisti- 
cally, based  upon  results  for  1917,  as  it  appears,  this  St.  Paul-Great  Northern  combi- 
nation is  materiaUy  stronger  than  the  Southern  Pacific-Rock  Island  system.    But 
each  of  them  is  just  a  bit  in  danger  of  being  elbowed  back  against  the  frontier,  north 
and  south,  by  the  overwhelming  power  of  the  two  great  middle  systems.    It  is  in- 
cumbent, therefore,  upon  this  plan  to  strengthen  the  St.  Paul-Great  Northern  by 
every  possible  means.    One  of  these  is  the  possible  additipn  of  the  financial  strength 
and  mileage  of  the  Minneapolis,  St.  Paul  &  Sault  Ste.  Marie  Railway,  commonly 
known  as  the  Soo.    Its  geographical  location  is  given  on  maps  17  and  18.    The  Soo 
stands  not  by  itself  alone,  however,  but  forms  part  of  the  great  Canadian  Pacific 
system.    Its  rails  all  trend  northwest-southeast  and  keenly  compete  for  business  with 
the  American  lines  throughout  Wisconsin,  Minnesota,  and  North  Dakota.    Merger 
with  the  St.  Paul  would,  however,  eliminate  the  Soo  as  a  competitor  from  quite  a 
long  list  of  common  points.    But  practically  aU  of  these,  it  should  be  observed,  would 
in  any  event  enjoy  competition  from  the  other  great  systems  which  gridiron  the  same 
territory.    Hence  no  violation  of  the  statute  in  this  regard  would  result.    The  Soo 
interchanges  abundantly  with  the  St.  Paul  at  Minnesota  Transfer,  giving  it  during 
1920  in  fact  more  tonnage  than  any  other  lines  except  the  Northern  Pacific  and  the 
Great  Northern.    In  exchange  the  St.  Paul  gave  to  the  Soo  more  traflic  than  any 
other  railroad  except  the  Northern  Pacific.    Thus  the  St.  Paul  exchange  with  the 
Soo  at  Minnesota  Transfer  was  third  in  order  of  St.  Paul  receipts,  and  second  in  de- 
liveries.   The  exceUent  freight  terminals  of  the  Soo,  considerably  exceeding  its 
present  needs  at  Chicago,  together  with  its  superior  facilities  in  the  twin  cities,  con- 
stitute still  further  elements  of  strength.    The  Soo  main  line  from  a  connection  near 
the  half-way  point  of  the  St.  Paul's  Techny  cut-off,  northerly  to  a  connection  with  its 
La  Crosse  division,  could  also  be  utilized  for  through  freight,  thereby  shortening  the 
distance  and  avoiding  congestion  and  the  long  ruling  gradients  each  way  out  of 
Milwaukee.    The  Portage  branch  of  the  Soo  could  also  be  used  for  a  cut-off  from  the 
La  Crosse  division  to  the  Wisconsin  Valley  division  of  the  St.  Paul  to  advantage.    The 
operation  of  one  company  between  Eau  Claire  and  Chippewa  FaUs  would  be  elimi- 
nated.   Other  economies,  it  is  alleged,  could  be  worked  out  in  connection  with  the 
handling  of  ore  in  the  Iron  Mountain  district.    Probably  the  Wisconsin  &  Northem,^ 

63LC.C. 


I 


4iL^ 


596 


INTERSTATE   COMMERCE   COMMISSION  REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


597 


i 


which  recently  the  Soo  line  haa  petitioned  the  Commission  to  merge,  would  also  go 
in  with  the  rest;  and  the  Duluth,  South  Shore  &  Atlantic  and  the  Copper  Range 
ought  to  be  included.  These  properties  will  not  add  much  strength,  as  their  lines 
contribute  little  business  except  between  Marquette  and  Calumet.  The  Spokane 
International  is  controlled  by  the  same  interests  as  the  two  last-named  railroads. 
It  would  probably  be  better  for  the  St.  Paul  to  take  this  than  to  leave  it  in  tJie  hands 
of  competitors.  It  would  at  all  events  afford  an  eastern  connection  with  the  Canadian 
Pacific  system. 

The  Soo  system  at  present  is  financially  above  the  average.  For  1917,  the  type 
year,  the  net  operating  income  amounted  to  5.7  per  cent  upon  an  investment  in  road 
and  equipment  of  144,414  per  mile  of  line,  a  capital  account  about  equal  to  that  of  the 
Rock  Island,  but  substantially  lower  than  either  the  Burlington  or  the  North  Western. 
The  corresponding  investment  account  for  the  Great  Northern  was  $56,077  per  mile  of 
line  and  for  the  Northern  Pacific  $71,035.  The  Soo  earned  in  1917  $2,502  per  mile  of 
line  as  against  the  Great  Northern  $3,452,  and  the  Northern  Pacific  $4,512.  But  its 
capital  account  is  so  low  that  it  showed  up  in  percentage  of  retiu*n  almost  as  well  as 
the  Northern  Pacific  and  substantially  better  in  percentage  on  investment  than  the 
St.  Paul.  Statistically,  then,  the  Soo  would  strengthen  the  proposed  Great  Northern- 
St.  Paul  combination. 

It  may  well  be  contended  that  the  Soo  line  should  remain  as  part  of  an  independent 
Canadian  transcontinental  route.    It  has  three  outlets  to  the  border,  and  unquestion- 
ably at  times  has  afforded  access  on  better  terms  to  the  Pacific  coast  than  would  have 
been  enjoyed  without  its  keen  rivalry  with  the  American  roads.    Despite  the  heavy 
interchange  with  the  parent  company,  the  Canadian  Pacific,  about  10,000  cars  yearly 
go  through  to  the  Pacific  coast;  and  the  annual  interchange  with  the  Canadian  Pacific 
amounts  to  27,000  carloads.    Yet  in  many  respects  it  is  still  largely  a  local  Wisconsin 
property.    So  that  the  Soo  must  be  treated ,  as  it  appears,  as  part  of  an  American  system 
certainly  for  protection  of  the  local  interests  of  Wisconsin.    In  that  state  there  is  a 
large  local  traffic,  particularly  forest  products,  hauled  to  the  sawmills  and  paper  mills 
in  the  Fox  River  and  Wisconsin  River  valleys.    The  proposal  to  incorporate  the  Soo 
in  the  St.  Paul-Great  Northern  system,  however,  at  once  raises  a  question  as  to  the 
effect  upon  competition  throughout  this  territory.    The  foregoing  list  of  common 
points  shows  how  widespread  this  is.    Much  of  the  business  is  locally  competitive; 
approximately  150  out  of  500  Soo  stations  are  served  by  two  or  more  roads  operating 
herein.    This  circumstance  is  fortunate  in  some  ways,  however,  for  competition  is  so 
keen  and  there  are  so  many  railroad  lines  that  the  merger  of  the  Soo  and  the  St. 
Paul-Great  Northern  would  still  leave  the  entire  region  penetrated  through  and  through 
with  competitive  local  service  both  from  the  Union  Pacific-North  Western  and  the 
Burlington-Great  Northern  systems.    This  circumstance  is  well  illustrated  by  maps 
19  and  21.    These  portray  the  interlacing  lines  of  all  three  of  these  systems  in  their 
various  possible  combinations.    The  only  district  where  competition  might  largely 
disappear  through  this  merger  would  be  in  North  Dakota.    There  is  little  mileage 
there  except  the  Great  Northern  and  the  Soo;  and  it  may  well  be  worth  considering 
that  only  the  Soo  lines  east  of  St.  Paul  should  be  incorporated  with  the  Great  Northern, 
leaving  these  western  portions  to  function  still  as  parts  of  a  Canadian  Pacific  system. 
The  Canadian  Pacific,  in  fact,  might  possibly  be  left  with  trackage  into  Chicago  over  a 
main  stem,  which  through  transfer  of  ownership  under  this  plan  would  form  part  of 
an  American  system.    Carload  traffic — and  95  per  cent  of  Soo  freight  business  moves 
in  carloads — often  betokens  long-haul  through  business,  and  all  such  through  business 
belonging  to  the  Canadian  Pacific  might  be  handled  by  a  trackage  contract  over  rails 
which  formed  part  of  the  Great  Northem-St.  Paul. 

Strength,  it  is  believed,  might  also  be  added  by  the  Soo  to  the  Great  Northern-St. 
Paul,  especially  in  connection  with  the  movement  of  coal.    There  is  an  immense 

63LC.C. 


tonnage,  rapidly  increasing,  which  goes  by  water  to  the  head  of  the  lakes,  and  of 
course  the  growth  of  grain  traffic  from  Duluth  and  Superior  eastbound  is  enormous. 
If  the  inclusion  of  the  Soo  lines  would  contribute  to  hold  this  business  for  the  Great 
Northern-St.  Paul,  it  would  perhaps  enable  that  system  to  support  more  easily  the 
long  bridge  lines  through  the  relatively  barren  territory  of  Montana  and  Idaho.  The 
Soo  also  provides  access  to  Stevens  Point,  Rhinelander,  Manistique,  Manitowoc,  and 
other  lake-ferry  points  and  affords  admission  to  the  Bessemer  and  Gogebic  iron  dis- 
tricts in  northern  Wisconsin  and  Michigan,  with  an  ore  dock  at  Ashland.  It  also 
taps  the  new  iron-ore  district  west  of  Duluth,  known  as  the  Cuyuna  Range  in  competi- 
tion with  the  Northern  Pacific.  All  told,  as  part  of  the  constitution  of  an  all-American 
railway  system,  it  is  difficult  to  see  what  better  disposition  of  this  Soo  mileage  can  be 
made  than  to  treat  it  thus.  In  the  Northern  Pacific-Burlington  system,  to  be  sure,  it 
would  perpetuate  competition  in  northern  North  Dakota,  instead  of  putting  an  end 
to  it.  And  also  it  would  quicken  competition  by  letting  that  system  into  Wisconsin, 
where,  according  to  maps  16  and  17,  the  St.  Paul  is  already  entrenched,  while  the 
Northern  Pacific  and  the  Burlington  are  entirely  absent.  But  probably  better  than 
either  plan,  would  be  to  leave  it  alone  as  it  is,  as  part  of  an  independent  foreign 
system.  Such  indeed,  despite  the  foregoing  recital  of  advantages,  is  my  fijial  rec- 
ommendation. But  it  is  dotted  in  on  all  the  St.  Paul-Great  Northern  maps  to  show 
how  the  land  lies,  if  it  be  included. 

Two  very  profitable  railroads  in  Minnesota  are  the  Duluth  &  Iron  Range  and  the 
Duluth,  Missabe  &  Northern.  Both  are  owned  either  directly  or  through  subsidiaries 
by  the  United  States  Steel  Corporation.  Their  location  is  shown  on  map  17.  Of  the 
two,  the  Duluth  &  Iron  Range,  the  more  easterly  road,  penetrates  the  iron-ore  r^on 
at  right  angles  to  the  shore  line  of  Lake  Superior  all  by  itself,  whereas  the  Missabe 
runs  directly  in  from  Duluth,  parallel  throughout  to  the  rails  of  the  Great  Northern. 
Both  of  these  properties,  as  shown  by  exhibit  6,  yield  a  large  return  annually  upon 
their  respective  investment  accounts.  The  Iron  Range  in  1917  earned  8.07  per  cent 
on  an  average  investment  per  mile  of  line  of  $102,784.  The  Missabe  earned  11.65  per 
cent  on  a  corresponding  capital  account  of  $108,997  per  mile  of  line.  To  accom- 
plish this  result,  the  net  operating  income  per  mile  of  line  must  necessarily  be  high, 
being  for  the  two  roads,  respectively,  $8,698  and  $12,381  per  mile  of  line.  Evidently 
one  has  to  do  here  with  very  high-grade  properties  from  the  point  of  view  of  produc- 
tivity and  profitableness.  This  arises,  of  course,  from  the  extraordinarily  heavy  train- 
loads  shuttling  back  and  forth  from  the  ore  beds  to  the  docks. 

These  iron-ore  properties  must,  of  course,  be  treated  as  common  carriers.  As  such 
they  must  find  place  in  this  consolidation  scheme.  Shall  they  remain  together,  as 
now,  under  one  ownership  and  management,  or,  as  prescribed  by  the  statute,  must 
they  be  so  distributed  as  to  be  competitive  one  with  another?  The  situation  obviously 
differs  broadly  from  that  which  obtains  where  a  great  number  of  competitive  shippers 
are  concerned.  The  situation  at  present  is  highly  monopolistic  except  in  so  far  as 
the  Great  Northern,  the  only  railroad  transporting  this  ore  which  is  independent  of 
the  steel  corporation,  serves  the  other  competitive  steel  manufacturers.  Three  treat- 
ments are  possible.  Under  the  fiurst,  proceedii^  upon  the  assumption  that  the  Great 
Northern  is  already  equipped  and  highly  skilled  in  handling  the  business,  both 
these  iron-ore  roads  would  go  to  the  St.  Paul-Great  Northern  system.  But  if  a  com- 
petitive situation  be  deemed  necessary,  then  the  Iron  Range,  which  is  not,  according 
to  the  map,  competitive  with  the  Great  Northern,  might  go  in  with  it  in  order  to  round 
out  its  system .  And  the  Missabe  might  be  assigned  either  to  the  Burlington-Northern 
Pacific  or  the  Union  Pacific-North  Western  system.  This  arrangement  would  intro- 
duce competition  in  the  carriage  of  the  iron  ore  between  two  of  the  three  northern 
transcontinental  systems  set  up  under  this  plan.  But  a  third  even  more  competitive 
situation  would  result  if  all  three  of  these  systems  alike  had  access  to  this  fertile 

63 1.  C.  C. 

63763—21 10 


f!i 


I 


598 


INTERSTATE  COMMERCE  COMMISSION  REPORTS. 


traffic.producing  territory.  The  Great  Northern  is  already  there.  The  Iron  Range 
and  ^e  Miambe  one  way  or  another,  might  go  respectively  to  the  systems  built  upon 
the  Union  Pacific  and  the  Burlington-Northern  Pacific.  It  is  diflicult  to  decide 
between  these  possibiUties  without  an  extended  examination  of  all  the  circumstances. 
IJut  provisionally  it  is  recommended  that,  for  the  sake  of  its  profitableness,  these  two 
iron^re  properties  should  be  aUocated  to  the  Great  Northem-St.  Paul  system  And 
It  will  be  observed  from  inspection  of  exhibit  6  that  the  result  is  appreciably  to 
strengthen  this  combination  more  nearly  to  a  parity  with  the  other  two  great  systems. 
quite  possibly  this  conclusion  might  be  modified  upon  further  inquiry.  But  at  all 
events  the  maps  and  the  statistical  exhibits  are  constructed  upon  this  basis. 

The  St.  Paul-Great  Northern  system  ought  also  to  be  provided  at  the  start,  in  view 
of  the  ^^olent  disruption  of  long-estabUshed  relationships,  with  some  sort  of  a  traffic 
arrangement  which  would  protect  it  both  at  Council  Bluffs  and  at  the  t^in  citie'' 
The  stub  end  at  the  Missouri  River,  as  it  has  already  appeared,  must  look  for  its 
nvelihood  from  western  interchange  ^vith  either  the  Union  Pacific  or  the  BurUngton. 
M  ^xf '^^""^  connection  with  the  latter  and  for  many  years  as  a  close  second  to  the 
North  Western  for  interchange  ^-ith  the  former  (page  574,  mpra),  this  St.  Paul  stub  at 
Omaha  would  of  necessity  dry  up  were  these  traffic  interchanges  to  he  diverted  else- 
where. And  the  same  thing  is  true  at  the  twin  cities.  Breaking  up  the  existing 
Hil  combination,  and  allying  the  Buriington  solely  with  the  Northern  Pacific,  might 
well  deprive  the  Great  Northern  of  so  much  business  northbound  from  the  Buriington 
Kiver  line  from  Chicago  as  to  jeopardize  its  welfare.  No  division  of  traffic  could  hope 
to  be  constantly  maintained  for  a  long  term  of  years;  but  during  a  transitional  period, 
whUe  the  vanous  systems  are  getting  upon  their  feet,  some  protection  to  the  Great 
Northern-St.  Paul  ought  to  be  afforded  by  such  a  contract.  The  heavy  investment 
of  the  Great  Northern  in  the  BurUngton,  which  will  doubtless  continue  for  many 
yews,  would  naturally  tend  to  encourage  such  favors.  Perhaps  the  Great  Northern 
will  not  need  this  protection,  but  it  ought  not  to  be  denied  it. 

Strength  for  the  St.  Paul  will  undoubtedly  flow  from  the  recent  acquisition  of  the 
Terre  Haute  &  Southeastern  Railroad.    This  will  provide  a  much-needed  coal  supply 
for  company  use,  and  will  also  enable  the  St.  Paul  to  share  more  largely  in  the  lucrative 
busmess  of  supplying  fuel  for  the  northwest.    One  of  the  elements  of  strength  in  the 
Burlington  system,  as  ah-eady  pointed  out,  is  the  north-and-south  coal  Une,  the 
length  of  Illinois.    The  Chicago  &  North  Western  simUariy  taps  the  Illinois  measures 
and  derives  a  large  revenue  from  this  traffic.    In  October,  1920,  for  example   it  re- 
ceived 773  carioads  of  soft  coal  from  the  Chicago  &  Eastern  Illinois,  .573  from  the 
Terre  Haute  &  Southeastern,  and  577  from  the  Illinois  Central  for  through  way- 
bilhng.    The  proposal   to  include  the  Terre  Haute  &  Southeastern  in  the  St.  Paul 
will  permit  it  to  share  in  this  profitable  traffic.    But  all  of  the  arguments  in  favor 
of  this  plan  commend  a  more  substantial  one  operating  in  the  same  direction. 
The  Chicago  &  Eastern  IlUnois  is  clearly  separable  into  two  parts,. lying  in  Indiana 
and  Illinois,  respectively.    Both  traverse  coal  territory,  and  both  alike  are  bridge 
Imee.    The  eastern  division  to  EvansviUe  via  Terre  Haute  is  a  preferred  connection 
of  the  LouisviUe  &  Nashville  into  Chicago.    Most  of  ita  coal  goes  north  to  the 
Chicago  district  or  the  northwest,  and  has  of  late  been  displacing  the  lake-ports 
c^,   both  for  domestic  and  raih-oad   uses.    The  western  or  Illinois  half  of  the 
Chicago  &  Eastern  Illinois,  on  the  other  hand,  is  a  bridge  for  the  railroads  south- 
west of  St.  Louis  into  Chicago.    As  will  appear  in  chapter  VI,  it  is  proposed  to  make 
use  of  It  for  the  amplified  Missouri  Pacific  system.    Coal  from  the  IlUnois  mines 
moreover,  more  largely  moves  southwest,  so  that  this  Missouri  Pacific  consolidation 
foUows  along  natural  economic  Unes.    It  is  recommended,  therefore,  that  this  Uttle 
property  be  subdivided  and  that  the  eastern  half  go  to  the  St.  Paul-Great  Northern 
system,  reciprocal  trackage  being  granted,  so  that  each  half  may  continue  to  reach 
Chicago  freely. 

63 1.  C.  C. 


CONSOLIDATION  OF  RAILROADS. 


599 


Addition  of  the  Chicago  &  Eastern  Illinois  would  materially  strengthen  the  St. 
Paul-Great  Northern  system  (even  more  so  were  the  Soo  to  be  included)  in  several 
ways.  First  and  foremost  it  would  afford  direct  connection  between  coal  fields  and 
a  great  cold  but  coaUess  territory.  It  follows  a  line  of  established  traffic.  The  St. 
Paul  during  three  months  to  December,  1920,  received  at  Chicago  and  Ladd,  9,588 
carloads,  mostly  coal,  from  this  property.  Its  deliveries  were  much  lighter  and 
should  be  increased,  if  the  St.  Paul-Great  Northern  gets  its  share  of  the  South  American 
and  Panama  Canal  business.  For  this  it  needs  an  Ohio  River  gateway  of  this  very 
sort,  connecting  \vith  the  Southern  Railway  and  the  Louisville  &  Nashville.  Thus 
\nll  Illinois  Central  competition  be  afforded.  Furthermore,  this  little  road  parallels 
the  Terre  Haute  &  Southeastern  for  150  miles  in  such  fashion  that  the  two  can  be 
worked  as  double  track.  It  is  also  believed  that  after  a  drastic  financial  overhauling, 
now  in  process,  the  Chicago  &  Eastern  Illinois  will  contribute  in  earning  power  on 
the  investment,  and  .thus  serve  to  equaUze  conditions  as  compared  with  the  other 
competing  systems. 

The  acquisition  of  the  Terre  Haute  &  Southeastern  by  the  St.  Paul,  already  an 
accomplished  fact,  raises  the  point  as  to  the  physical  connection  between  the  two 
properties,  and  it  is  urged  that  the  Chicago,  Milwaukee  &  Gary  Railroad  should  also 
be  incorporated  in  the  St.  Paul  system.  Its  present  connection  with  the  eastern 
line-  is  over  the  Indiana  Harbor  Belt  Railroad  and  by  means  of  the  Elgin,  Joliet  & 
Eastern;  but  it  is  represented  that  the  Chicago,  Milwaukee  &  Gary,  although  originally 
intended  for  an  outer  belt  Une,  has  never  been  constructed  beyond  Rockford  on  the 
north  and  Momence,  111.,  on  the  south.  By  a  short  extension  east  of  Momence 
c(»nnection  could  be  had  with  all  the  eastern  lines,  to  form  still  another  outer  belt 
for  handling  through  traffic  aroimd  Chicago.  Upon  this  point  decision  is  reserved, 
to  the  end  perhaps  that  a  more  careful  examination  may  be  made  of  the  whole  question 
of  terminal  facilities.  It  would  be  a  mistake  unquestionably  to  transfer  a  single 
belt  line  to  one  system,  even  an  outer  one,  if  it  could  be  otherwise  cooperatively 
developed  for  the  use  of  all;  and  yet  the  St.  Paul  group  should  surely  have  some  con- 
necting link  around  Chicago. 

The  St.  Paul-Great  Northern  ought  surely  to  have  an  independent  access  to  St. 
Louis.  It  is  of  the  essence  of  this  plan  in  general  that  all  the  transcontinental  systems 
should  have  a  dual  base — Chicago  and  St.  Louis.  The  most  feasible  connection  seems 
to  be  to  take  the  line  of  the  Minneapolis  &  St.  Louis  from  Mason  City,  Iowa,  south  to 
Albia.  From  this  point  Wabash  trackage  with  the  Union  Pacific  would  carry  the  line 
to  Moberly,  Mo.  This  route  is  plotted  on  map  17.  Then  from  Moberly  into  St. 
Louis  a  feasible  line  would  be  to  cross  the  Missouri  River  and  come  in  by  trackage 
on  the  Katy  (Frisco  system)  to  St.  Louis;  or,  if  preferred,  entrance  into  St.  Louis 
could  be  had  jointly  with  the  Union  Pacific  over  the  Wabash  line.  Thus  would 
be  provided  a  route  to  mateh  with  the  Burlington-Northern  Pacific  river  line  via 
Dubuque.  The  possession  of  this  Dubuque  line,  in  fact,  renders  the  Mason  City- 
Albia  division  of  the  MinneapoUs  &  St.  Louis  superfluous  in  that  system. 

The  independence  and  prestige  of  the  St.  Paul-Great  Northern  system  might  well 
be  promoted  by  taking  over  the  Burlington  Une  from  Shoshoni,  Wyo^,  up  to  Laurel, 
Mont.,  or  at  all  events,  trackage  rights  might  be  given  thereon.  Inspection  of  map  16 
shows  that  the  Burlington  has  two  parallel  lines  to  the  northwest  across  Wyoming 
up  toward  Billings,  Mont.  Surely  it  could  spare  trackage  over  the  western  of  these 
two,  without  risk  of  an  overload.  The  result  would  be  to  establish  a  direct  liaison, 
as  shown  by  map  21,  between  the  Union  Pacific  and  the  Great  Northem-St.  Paul 
systems,  which  otherwise  would  be  widely  separated.  The  estabUshment  of  such 
contacts  will  surely  be  more  economically  effected  than  by  a  wasteful  expenditure 
c»f  capital  in  parallel  construction. 

63 1.  C.  C. 


*Xhmm, 


600 


INTERSTATE  COMMERCE   COMMISSION  REPORTS. 


Entrance  of  the  St.  Paul-Great  Northern  to  Portland,  as  already  suggested,  will  be 
provided  by  means  of  the  Spokane,  Portland  &  Seattle.  The  Spokane  Merchants' 
Association  recommends  that  this  line  should  be  made  joint  for  the  common  use  of 
all  systems,  and  quite  probably  this  might  be  done.  Incidentally,  the  Northern 
Pacific,  as  it  appears,  might  withdraw  from  a  part  of  this  investment  in  favor  of  the 
St.  Paul,  in  so  far  at  least  as  it  has  a  parallel  line  of  its  own. 

Merger  of  the  Chicago,  Rock  Island  &  Pacific  Railway  and  of  the  Southern  Pacific 
Company  to  constitute  a  through  transcontinental  system  via  the  southern  gateway 
18,  after  due  examination,  unreservedly  recommended.  Such  a  combination  matches 
almost  point  for  point  with  the  Santa  Fe  system.  The  correspondence  even  as  to 
details  is  extraordinary,  especially  after  the  supplementary  changes  herewith  recom- 
mended. The  opinion  of  experts  is  unanimous.  President  Carl  Gray,  of  the  Union 
Pacific,  formerly  regional  director  under  the  federal  Railroad  Administration,  writes 
that  "The  Rock  Island-El  Paso  <fe  South westem-Southem  Pacific  combination  is 
ideal  for  the  southwestern  transcontinental  line,  competitive  with  the  Santa  Fe." 
Charles  A.  Wilson,  of  Cincinnati,  an  unprejudiced  railway  executive  of  wide  ex- 
perience, states  that  such  a  combination  "is  sound."  No  contrary  view  has  been 
anywhere  expressed.  Perhaps  the  most  careful  analysis,  in  utmost  detail,  was  the 
elaborate  report  of  J.  W.  Kendrick  upon  the  Rock  Island  system  to  Jacob  M.  Dickin- 
son, at  that  time  receiver,  in  1915.* 

This  authority,  commenting  upon  the  not  infrequent  comparisons  of  the  Rock 
Island  and  the  Santa  Fe  systems,  pointa  out  the  likeness  which  would  exist,  if  closer 
reUtions  between  the  Rock  Island  and  the  Southern  Pacific  were  to  be  set  up.  Sep- 
arately, the  former  "extends  from  Chicago  to  the  Mississippi  River  and  there  ex- 
plodes." It  sprawls  all  over  the  map  to  St.  Paul,  to  Omaha,  to  Denver,  to  New 
Mexico,  to  Galveston,  and  almost  to  New  Orleans.  Its  general  appearance  betokens 
a  failure  to  concentrate  or  specialize  in  any  given  field.  This  diversion  of  activity 
has  left  it,  "as  far  as  California  is  concerned,  a  composite  road,  whereas  the  Santa  Fe 
18  an  entity."  But,  nevertheless,  examination  of  map  23  proves  that  ^e  predomi- 
nant trend  of  the  Rock  Island  is  south  westward,  and  that  it  parallels  the  Santa  Fe 
system  as  far  as  it  goes  in  that  direction  in  an  unusual  way.  The  Kendrick  report 
definitely  recommended  intensive  development  for  the  Rock  Island  rather  than  that 
It  should  undertake  costiy  extensions  to  the  Pacific  coast,  as  the  Santa  Fe  has  done; 
and  it  points  out,  moreover,  that  the  necessity  for  such  extension  is  obviated  by  the 
natural  and  binding  interrelationship  which  exists  with  the  Southern  Pacific.  The 
Rock  Island,  in  other  words,  affords  the  shortest  and  most  direct  route  from  southern 
California  by  way  of  the  Southern  Pacific  to  the  heart  of  the  middle  west. 

The  connecting  link  between  the  Southern  Pacific  and  the  Rock  Island  is  the 
El  Paso  &  Southwestern.  This  property,  as  map  23  shows,  comprises  1,028  miles  of 
line,  running  from  Tucson,  Ariz.,  eastward  to  El  Paso,  thence  to  Tucumcari,  N.  Mex., 
with  certain  subsidiary  lines.  The  iniportant  and  connecting  link  with  the  Rock 
Island  is  the  bridge  of  332  miles  from  El  Paso  to  Tucumcari.  Over  this  line  from 
Chicago  by  the  Rock  Island,  and  from  El  Paso  west,  a  large  volume  of  trafl^c  has 
moved  for  many  years.  Crack  passenger  trains,  two  a  day,  are  operated  in  each  direc- 
tion, matching  the  Santa  Fe  service.  This  route  already  is  clearly  one  of  the  existing 
"channels  of  trade  and  commerce"  which  the  statute  directs  shall  be  preserved. 
The  El  Paso  &  Southwestern  line  west  of  El  Paso  is  parallel  to  and  competitive  with 
the  Southern  Pacific  as  far  as  Tucson.  To  or  from  points  west  of  Tucson  it  is  not 
competitive  from  lack  of  connections.  The  road  serves  a  rich  mining  and  smelting 
country  south  of  the  Southern  Pacific  and  this  portion  would,  if  merged,  provide  a 

*  Pages  xi,  613,  Voluminous  exhibits  and  maps,  privately  published.    One  of  the  most  comprehenslvt 
examinations  of  a  railroad  property  extant. 

63 1.  C.  C. 


CONSOLIDATION  OF  RAILROADS. 


601 


second  track  for  the  handling  of  through  traffic.  The  property  is  now  owned  by  the 
so-called  Phelps-Dodge  interests  and  is  administered  in  connection  with  their  nu- 
merous mines.  The  same  people  are  influential  in  the  Texas  &  Pacific  Railway. 
The  El  Paso  &  Southwestern  was,  in  fact,  constructed  in  order  to  afford  a  connection 
with  the  Texas  &  Pacific  for  smelter  products  to  the  Gulf  at  New  Orleans,  independ- 
ently of  the  Southern  Pacific.  The  resultant  reduction  of  the  then  monopolistic 
Southern  Pacific  rates  is  said  to  have  practically  paid  for  the  cost  of  construction 
within  the  first  five  years.  At  present  tJie  El  Paso  &  Southwestern  has  intimate  and 
long-standing  traffic  arrangements  with  the  Rock  Island  covering  the  above-described 
interchange  of  through  business.  Incidentally,  of  course,  its  rather  involved  cor- 
porate structure,  holding  companies,  and  the  like  would  disappear  in  the  proposed 
new  meiger. 

Such  a  combination  would  derive  strength  from  its  composite  origin.  The  Southern 
Pacific  has  unparalleled  extension  throughout  California.  Many  of  its  advantagcH 
could  never  be  duplicated  by  competing  roads.  On  the  other  hand,  the  Rock  Island 
is  firmly  intrenched  in  the  territory  between  Kansas  Citj'^and  Chicago.  It  posseeee.", 
as  the  accompanying  table*  reveals,  the  shortest  line  between  Chicago  and  Des  Moines 


Route. 


Chicago,  111.,  to— 

Des  Moines,  Iowa 

Omaha,  Nebr 

Denver,  Colo , 

St.  Paul,  Minn 

Cedar  Hapids,  Iowa.. 
Watortown.S.  Dak.- 

Kansas  City,  Mo , 

St.  Joseph, 'Mo 

Oklahoma  City,  Okla 

Fort  Worth,  Tex 

Galveston,  Tex , 

El  Paso,  Tex , 

St.  Louis,  Mo.,  to — 

Denver,  Colo , 

Kansas  City,  Mo 

El  Paso,  Tex , 


Number 

Rank  of 

of 

Rock 

lines. 

Island. 

1 

4 

3 

6 

3 

3 

6 

.3 

4 

4 

S 

1 

2 

4 

2 

1 

Route. 


Omaha,  Nebr.,  to— 

Denver,  Colo 

Kansas  City,  Mo.,  to — 

Oklahoma  City,  Okla... 

Fort  Worth,  Tex 

Galveston ,  Tex 

ElPaso,Tox 

Wichita,  Kans , 

Denver,  Colo 

St.  Paul,  Minn.,  to— 
-    Kansas  City,  Mo 

St.  Louis,  Mo , 

Oklahoma  Citv,  Okla.,  to— 

Fort  Worth,  Tex , 

Memphis,  Tenn.,  to— 

El  Paso, Tex... ^ 


Number 

of 

lines. 


Rank  of 

Rock 

Island. 


4 
4 

13 
1 
2 
! 

I 
2 

2 

2 


1  Rock  Island  and  Santa  Fe  distances  are  the  same. 

and  Chicago  and  El  Paso,  as  also  the  shortest  line  between  St.  Louie  and  Kansas  City 
and  El  Paso.  It  also  has  the  shortest  line  from  Kansas  City  to  Denver  and  from 
Kansas  City  to  St.  Paul.  But  its  great  strength  in  branches  and  feeders  throughout 
Kansas,  Nebraska,  and  Iowa  is  greatly  enhanced  by  its  unusual  terminal  facilities  at 
Cliicago.  As  one  of  the  earliest  western  roads,  it  obtained  valuable  property  even  in 
the  heart  of  the  metropolitan  district.  And  its  peculiar  entrance  is  also  noteworthy. 
Unlike  all  the  other  western  roads,  it  sweeps  clear  around  the  city  and  enters  it  from 
the  east  side,  with  a  line  to  terminal  properties  on  the  lake  front.  Thus  it  cuts  across 
every  trunk  line,  enjoying  direct  physical  connection  therewith.  And  then  its 
Oklahoma-Arkansas  line  from  Memphis  traverses  a  rich  and  rapidly  growing  territory, 
and  another  line  penetrates  the  lumber  region  of  Louisiana  to  the  Red  River.  At 
tliis  point,  as  map  23  indicates,  there  is  direct  physical  connection  with  the  Southern 
Pacific  into  New  Orleans.  Thus  the  Rock  Island,  despite  its  somewhat  erratic  course 
and  its  wide  dissemination,  has  elements  of  strength  in  the  middle  west  which  admi- 
rably parallel  and  in  fact  surpass  the  representation  of  the  Santa  Fe  in  that  district. 
The  very  difference  between  the  Rock  Island  constituency  and  that  of  the  Southern 
Pacific  is  noteworthy  financially.    A  certain  compensatory  quality  in  the  traffic  of 


-  From  report  of  examination  of  the  Chicago,  Rock  Island  &  Pacific  Railvvay,  by  E.  W.  McKenna. 
C>3  I.  C.  C. 


/ 


1  'f!l^ 


602 


INTERSTATE   COMMERCE   COMMISSION  REPORTS. 


CONSOLIDATION  OF  RAILROADS. 


603 


the  two  roads  obtains.  The  Rock  Island  is  distinctively  a  granger  property.  The 
Southern  Pacific  derives  a  large  revenue  from  the  carriage  of  California  fruits  and 
vegetables.  If  the  Kansas  wheat  crop  fails,  the  Pacific  coast  traffic  may  remain 
undisturbed  and  vice  versa. 

It  may  reasonably  be  inquired  at  this  point,  why,  if  this  complementary  relation- 
ship between  the  Rock  Island  and  the  Southern  Pacific  obtains,  no  proposal  for  closer 
alliance  or  merger  has  ever  been  made  heretofore.    The  explanation  is  afforded  by 
certain  competitive  complications  which  have  at  times  engendered  rivalries  not 
provocative  of  consolidation.     The  first  arises  from  the  independence  of  the  El  Paso 
&  Southwestern.    It  originates  a  rich  traffic  for  which  both  the  Rock  Island  and  the 
Southern  Pacific  compete,  eastbound.    The  bridge  portion  across  New  Mexico  north 
of  El  Paso  constitutes  no  element  of  discord.    But  it  is  the  section  parallel  to  the 
Southern  Pacific  as  far  as  Tucson  which  originates  most  of  the  lucrative  business. 
This  might  go  east  by  way  of  the  Southern  Pacific  to  the  Gulf  or  else  northeast  via 
Tucumcari  over  the  Rock  Island.    As  long  as  this  property  remains  independent  of 
the  other  two  systems  there  is  bound  to  be  competition  for  this  traffic  other  than 
smelter  products,  which  naturally  go  by  water  via  the  Gulf.    The  second  obstacle  to 
identity  of  interest  heretofore  concerns  the  routing  of  through  traffic  from  California. 
The  Southern  Pacific  is  able  to  reach  the  central  west  by  other  connections  than  the 
Rock  Island,  which  afford  it  a  longer  haul  and  consequently  a  better  division  of  the 
through  rate.    The  connection  at  Sierra  Blanca  with  the  Texas  &  Pacific  and  at 
Alpine  with  the  Kansas  City,  Mexico  &  Orient,  although  inferior  otherwise,  permits 
traffic  to  be  handled  by  a  route  longer  than  that  of  the  Rock  Island  (cf.  maps  25 
and  26).    And  by  carriage  still  further  east  to  a  connection  with  the  Katy,  or  even 
at  New  Orleans  with  the  Illinois  Central,  the  Southern  Pacific  enjoys  a  still  greater 
proportion  of  the  joint  through  rate.    Thus  on  the  Southern  Pacific  side  there  is 
impatience,  perhaps  at  the  close  affiliation  of  the  Rock  Island  with  the  Phelps-Dodge 
interests,  and  a  corresponding  ground  of  complaint,  contrariwise,  against  the  Southern 
Pacific  on  account  of  its  routing  propensities.     This  roundabout  routing,  by  the  way, 
appears  to  constitute  an  unmitigated  economic  waste.    Were  the  El  Paso  &  South- 
western to  be  merged  with  both  the  other  properties,  each  of  these  sources  of  misunder- 
standing would  tend  to  disappear.    From  every  point  of  view  it  is  confidently  believed 
that  the  merger  would  promote  efficiency,  thereby  affording  better  service  to  the 
public,  and  that  it  would  put  an  end  to  certain  uneconomic  practices  in  transporta- 
tion.   The  substitution  of  direct  hauls  for  roundabout  ones  was  one  of  the  great  contri- 
butions of  the  federal  Railroad  Administration.    This  merger  would  tend  to  perpetuate 
those  gains. 

A  prime  requisite  for  logically  rounding  out  the  Rock  Island-Southern  Pacific 
system  is  the  provision  of  a  line  up  the  Mississippi  Valley  from  Memphis  to  St.  Louis, 
and  thence  on  to  the  north.  Consideration  of  map  23  shows  that  the  Rock  Island  at 
present  has  two  long  isolated  branches  running  eastward  to  the  Mississippi  River  at 
Memphis  and  S  t.  Louis,  respectively.  There  is  no  connection  north-and-south  between 
the  ends  of  these  two  arms  and  Chicago.  The  result  is  that  traffic  taken  on  by  inter- 
change from  southwestern  connections,  or  originating  in  Louisiana  or  Arkansas  is 
carried  only  a  short  distance  by  the  Rock  Island,  and  is  then  turned  over  for  the  long 
haul  to  other  roads.  It  has  long  been  appreciated  that  this  arrangement  constituted 
an  outstanding  defect  of  the  system.  The  ill-fated  merger  with  the  Frisco  was  in  part 
intended  to  remedy  this  defect.  Backed  up  and  supplemented  by  the  Southern 
Pacific  mile^e,  so  richly  represented  throughout  Texas  and  Louisiana,  this  disabilit} 
becomes  all  the  more  glaring.  To  meet  the  situation,  an  exchange  with  the  St.  Louis 
Southwestern  is  proposed,  elsewhere  discussed  in  chapter  VI  (page  625,  infra).  This, 
it  ia  believed,  permits  of  a  satisfaction  of  the  Rock  Island  need  and  will  not  preju- 
dicially affect  the  resultant  Frisco  system.    As  indicated  on  map  23,  the  proposal 

es  I.  c.  c. 


takes  the  form  of  merger  in  the  Rock  Island  of  the  St.  Louis  Southwestern  road  from 
Brinkley,  Ark.,  west  of  Memphis,  up  to  lllmo  at  the  Thebes  bridgehead.  In  taking 
this  mileage  the  Rock  Island  will  assume  all  rights  and  trackage  obligations  of  the  St. 
Louis  Southwestern  in  its  relation  to  the  Missouri  Pacific.  The  Missouri  Pacific,  in 
other  words,  will  still  have  trackage  between  lUmo  and  Paragould,  Ark. ;  and  in  return 
the  Rock  Island  will  take  trackage  east  of  the  Mississippi  from  the  Thebes  bridge  up  to 
St.  Louis.  And  the  St.  Louis  Southwestern,  as  part  of  the  amplified  Frisco,  will  come 
north  over  the  river  division  of  that  system  up  the  west  bank  of  the  Mississippi. 

Supplementation  of  the  Rock  Island  system  by  a  line  up  the  Mississippi  Valley 
north  of  St.  Louis  is  as  important  as  entrance  to  St.  Louis  from  the  south.  The  Mer- 
chants' Exchange  of  that  city  proposes  that  Burlington  trackage  be  taken,  absorbing 
the  St.  Louis  &  Hannibal  Railway  and  using  trackage  on  the  Wabash  to  ihe  North  St. 
Louis  yards  of  the  Rock  Island.  The  need,  however,  rather  passes  the  limit  of  mere 
trackage;  and  the  recommendation  is  made,  instead,  that  the  river  line  of  the  Bur- 
lington, at  least  as  far  up  as  Keokuk,  should  be  actually  merged  in  the  Rock  Island 
system,  and  that  such  use  as  the  Burlington  desires  to  make  of  it  shall  be  had  by  means 
of  trackage.  This  reversal  of  relationship  is  based  upon  a  considerable  change  of 
operating  conditions  within  the  Burlington  system  since  the  construction  of  the  low- 
grade  direct  north-and-south  line  (map  16)  from  St.  Louis  to  Davenport,  Iowa.  Origi- 
nally the  Burlington  road  up  the  west  bank  of  the  Mississippi  to  Keokuk,  known  as  the 
St.  Louis,  Keokuk  &  Northwestern,  formed  part  of  the  Burlington  line  between  St. 
Louis  and  St.  Joseph,  by  way  of  the  former  Hannibal  &  St.  Jo  Railroad;  but  with  the 
completion  of  a  better  route  direct  to  Kansas  City  via  Mexico,  the  east-and-west  line 
from  Hannibal  has  assumed  a  mere  local  importance;  and,  with  the  Illinois  north-and- 
south  line  above  mentioned,  the  river  road  up  to  Keokuk  becomes  also  almost  super- 
fluous, except  for  local  traffic.  Assuredly  the  Burlington  ought  not  to  be  embarrassed 
in  any  way  by  withdrawal  of  such  nonessential  links  in  its  system.  Doubtless  an 
arrangement  one  way  or  another  for  exchange  of  facilities  could  be  worked  out,  and  a 
reconunendation  to  this  effect  is  herewith  made.  This  should  of  course  cover  not  alone 
the  line  up  to  Keokuk  but  its  continuation  on  to  Burlington.  Thus  would  the  Rock 
Island  be  fortified  for  efficient  operation  in  a  very  substantial  way.  As  for  the  proposal 
that  the  Rock  Island  (map  23)  should  be  tied  in  at  Peoria  by  merger  of  the  Chicago, 
Peoria  &  St.  Louis,  this  little  railroad  is  so  crooked,  with  such  heavy  gradients,  and  in 
such  poor  condition  that  it  would  cost  more  to  make  it  a  main  stem  Sian  to  lay  out  a 
new  line.  As  a  Rock  Island  operating  proposition  between  St.  Louis  and  Chicago  the 
proposal  is  preposterous  for  through  business.  The  Alton,  the  Chicago  &  Eastern 
Illinois,  the  Wabash,  and  the  Illinois  Central  lines  betwen  these  points  vary  in  length 
from  284  to  294  miles.  The  Chicago,  Peoria  &  St.  Louis  line  over  Rock  Island  rails 
would  be  362  miles  long,  a  fatal  handicap,  aggravated  by  the  poor  condition  of  the  line. 
This  little  road,  bs  it  appears,  must  be  treated  purely  as  a  local  proposition.  What  the 
Rock  Island  needs  across  Illinois  is  another  main  stem,  not  a  branch. 

Taking  a  broad  view  of  the  effect  upon  the  Rock  Island-Southern  Pacific  system  of 
completing  the  line  up  the  Mississippi  Valley,  it  may  be  worth  while  to  trace  with  the 
eye  on  map  23  the  route  which  would  be  afforded  under  the  new  arrangement  from 
Texas  points  north.  Starting  from  San  Antonio,  thence  to  Houston,  traffic  would 
move  north  over  the  Houston  East  &  West  Texas  to  Shreveport,  thence  either  by 
trackage  east  over  the  Vicksburg,  Shreveport  &  Pacific  to  Ruston,  La.,  on  the  Rock 
Island  division  in  Louisiana;  or  else  perhaps  by  trackage  from  Shreveport  north  over 
the  St.  Louis  Southwestern  to  a  similar  connection  at  Fordyce,  Ark.  The  traffic  would 
then  go  on  over  the  route  described  in  the  preceding  paragraph.  In  the  opposite 
direction  tonnage  might  be  moved  from  Towa  points  or  north  in  almost  equal  compe- 
tition with  the  Illinois  Central  as  far  down  as  Louisiana  and  Texas.  A  substantial 
reenforcement  of  the  system  could  thus  be  effected  and  keen  competition  in  service  be 
engendered  throughout. 

63  L  0. 0. 


» 


•f 


»* 


604 


INTERSTATE   COMMERCE  COMMISSION   KEPOUTS. 


Certain  other  minor  changes  are  recommended  here  and  there  in  the  Rock  Island- 
Southern  Pacific  system  to  fit  it  more  evenly  to  match  up  with  the  Santa  Fe.    The 
northwestern  branch  into  South  Dakota,  it  will  be  recalled,  is  elsewhere  recommended 
for  more  effective  use  in  the  BurUngton-Northem  Pacific  system  (pa^  593,  supra). 
It  is  extraneous  to  the  Rock  Island  and  quite  serviceable  by  exchange  with  the  Bur- 
lington.   Northwest  of  Kansas  City  the  merger  is  recommended  of  the  Missouri  Pacific 
branch  from  Concordia,  Kans.,  to  Hastings.  Tex.    This  proposal  adds  no  strength 
but  rather  a  liabihty.    But  it  is  part  of  a  plan  to  withdraw  the  Missouri  Pacific  from 
local  Kansas  service,  as  elsewhere  discussed  in  connection  with  that  road  (page  630. 
infra) .    The  Santa  Fe  is  to  take  the  east-and-west  line  out  to  Lenora,  Kans. ,  thus  par- 
alleling the  Denver  line  of  the  Rock  Island  in  northern  Kansas;  but  the  Concordia- 
Hastings  line  fita  in  better  to  the  Rock  Island  system  to  perfect  this  matched  com- 
petition in  this  territory.    The  burden  must  be  asstuned  in  order  to  steady  the  situa- 
tion.   ContrariH-ise,  UabiUty  for  the  Rock  Island  might  well  be  laid  down  by  the 
abandonment  of  the  so-called  Decorah  branch  from  Cedar  Rapids  north  in  eastern 
Iowa.    There  are  now  so  many  east-and-west  lines  through  this  territory  that  there  is 
not  a  decent  li\ing  for  a  local  north-and-sotith  branch. 

Another  minor  change  in  the  Rock  Island  system  might  well  be  the  inclusion  of 
the  Vicksburg,  Shreveport  &  Pacific  road  (map  23),  cutting  east-and-west  across 
northern  Louisiana.  An  alternative  disposition  is  suggested  in  chapter  VI,  but  this 
merger  is  on  the  whole  deemed  preferable.  For,  as  the  map  shows,  it  would  tie  in  all 
the  Southern  Pacific  Unes  in  Texas  with  connections  up  toward  the  northeast,  and 
particularly  up  the  new  river  hne  above  described,  reaching  clear  up  to  BurUngton, 
Iowa.  Yet  another  addition  is  feasible.  The  Midland  Valley  Railroad  (see  map  23) 
is  a  little  independent  property  running  from  Wichita,  Kans..  southwest  to  near  Fort 
Sinith,  Ark.  It  must  be  cared  for  somehow  under  a  general  plan.  But  like  so  many 
of  ita  sort,  it  must  be  regarded  as  a  burden  rather  than  an  asset.  In  either  the  Missouri 
Pacific  or  the  Frisco  systems  its  merger  would  put  an  end  to  competition,  as  these 
lines  ramify  widely  through  northeastern  Oklahoma.  B  ut  in  the  Rock  Island  system , 
as  the  map  shows,  the  Mdland  Valley  would  cut  off  a  comer  if  connected  by  trackage 
of  a  few  miles  at  the  southern  end,  and  it  might  open  up  a  pretty  good  route  from 
Wichita  down  to  New  Orieans,  including  the  Southern  Pacific  entrance  thereto.  It 
would  also  let  the  Rock  Island  into  Tulsa  and  make  that  place  another  common  point 
with  the  Santa  Fe. 

Several  mergers  of  subsidiary  roads  are  recommended  for  the  Southern  Pacific  sys- 
tem.   The  San  Antonio  &  Aransas  Pass,  as  shown  on  map  ^3,  ramifies  throughout 
Bouthem  Texas,  north  and  south  of  the  main  line  of  the  Southern  Pacific  between  San 
Antonio  and  Houston.    None  of  the  stock  is  now  owned  by  the  Southern  Pacific 
Company,  owing  to  the  Texas  railroad  policy;  but  the  Southern  Pacific  is  the  guar- 
antor of  principal  and  interest  for  $17,544,000  of  first-mortgage  bonds.    It  pays  sub- 
stantially all  of  the  interest,  approximately  $700,000  yearly.    Being  responsible  for 
the  properties,  but  at  the  present  without  effective  control,  this  company  ought 
property  to  be  merged .    As  an  integral  part  of  the  Southern  Pacific  system  the  annual 
deficit  can  not  be  borne  without  such  operating  economies  and  saving  of  overhead  as 
merger  would  permit.    The  Texas-Mexican  Railway  (also  shown  on  map  23)  affords 
contact  with  Laredo  and  really  ought  to  go  with  the  San  Antonio  &  Aransas  Pass  to 
afford  a  connection  with  the  Mexican  National  Railways.    Possibly,  however,  this 
line  oug-ht  to  go  to  the  Frisco  system  for  a  Mexican  connection,  inasmuch  as  the  South- 
ern Pacific  has  another  contact  with  the  Mexican  railroads  at  Eagle  Pass.    The  Texas 
Midland  is  also  shown  on  map  23  as  a  small  road  running  southwest  from  Paris,  Tex. 
It  originates  a  good  deal  of  cotton  going  to  the  Gulf  and,  moreover,  affords  a  con- 
venient connection  with  the  Frisco  system.    It  ought  either  to  be  allocated  to  the 
Rock  Island-Southern  Pacific  or  to  the  Frisco.    Other  subsidiaries  which  might  well 

63 1.  C.  C. 


CONSOLIDATION   OF   RAILROADS. 


605 


be  included  are  the  San  Diego  &  Arizona,  the  Arizona  &  New  Mexico,  the  Houston 
&  Brazos  Valley,  and  the  Franklin  &  Abbeville.  But  these  are  all  details  and  might 
be  left  for  future  action.  The  San  Antonio,  Uvalde  &  Gulf  road  is  another  little 
property  which  also  probably  belongs  in  the  Southern  Pacific  group,  but  which  may 
best  be  reserved  without  final  decision  at  this  time.  Unless  it  be  included  here  it 
probably  should  be  tied  in  with  one  of  the  Southwestern-Gulf  systems. 

Some  disposition  ought  to  be  made  of  the  Northwestern  Pacific,  the  line  from  San 
Francisco  between  the  ocean  and  the  Coast  Range.  Its  location  appears  upon  maps 
16  and  22.  At  present  this  railroad  is  controlled  through  equal  stock  ownership  by 
the  Santa  Fe  system  and  the  Southern  Pacific.  But  the  Southern  Pacific  has  pro- 
vided funds  for  extensions  and  owns  $26,029,000  of  $30,399,000  of  the  outstanding 
bonds.  Furthermore,  the  physical  connection  of  the  line  apparently  commends  at 
least  a  continuation  of  the  present  joint  control.  The  strength  of  the  two  middle- 
group  transcontinental  lines  is  such  that  it  hardly  seems  fair  to  weaken  this  partici- 
pation of  the  present  holders  for  their  especial  benefit.  Certainly  the  Union  Pacific 
has  no  claim  to  it.  The  Burlington,  without  any  north-and-south  line  in  California, 
has  a  slightly  stronger  interest;  but  it,  again,  is  a  direct  line  with  superabundant 
resources  as  compared  with  the  two  roundabout  southern  transcontinental  systems. 
There  is  one  possibility  which  has  merit.  The  weakest  of  all  the  transcontinental 
systems,  isolated  up  along  the  Canadian  border,  is  the  St.  Paul-Great  Northern.  Some 
day  it  ought  to  have  access  to  California  territory,  and  the  two  lines  shown  on  map  17 
down  the  Willamette  and  Deschutes  valleys  are  fingers  pointing  in  the  direction  of  a 
natural  extension.  If,  in  due  time,  another  north-and-south  through  line  shall  be 
required,  as  it  undoubtedly  will,  why  might  not  the  Northwestern  Pacific  be  then 
treated  as  appurtenant  to  this  Great  Northern-St.  Paul  system.  It  is  the  one  way 
left  by  which  it  may  enter.  The  gap  from  Trinidad  on  the  coast  in  northern  Cali- 
fornia to  Eugene,  Oreg.,  is  already  in  part  bridged  by  logging  roads.  These  may 
conceivably  develop  into  substantial  railroad  lines.  When  that  time  comes  the 
Commission  might  well  encourage  trading,  to  the  end  that  the  Northwestern  Pacific 
shall  pass  out  of  its  present  hands  and  into  those  of  the  St.  Paul-Great  Northern.  But 
such  affairs  need  not  be  seriously  considered  at  this  time.  There  is  certainly  no 
ground  for  recommending  any  such  afilliation  at  present. 

The  Atchison,  Topeka  &  Santa  Fe  system  stands  as  one  of  the  most  compact,  com- 
plete, and  financially  weU-balanced  railroads  in  the  United  States.  It  is  a  monument 
to  the  sagacity  of  its  late  distinguished  president  and  his  fellow  managers  of  the  enter- 
prise. A  combination  of  courage  and  intelligence  has  produced  a  railroad  which  at 
present  reaches  almost  every  point  that  it  should,  and  which  has  such  connections 
hither  and  thither  as  to  consolidate  its  strength  at  all  strategic  points.  Nor  is  energy 
dissipated  anywhere  by  useless  or  unnatural  extensions  beyond  its  natural  gateways. 
A  brief  analysis  of  its  layout  is  necessary  to  confirm  this  assertion.  And  the  statement 
has  a  direct  bearing  upon  the  recommendation  that  the  Santa  Fe  is  inherently  strong 
enough  to  be  trusted  to  continue  alone,  even  altnough  surrounded  by  much  larger 
consolidations.  It  is  a  prime  example  of  the  principle  that  net  mileage,  that  is  to  say, 
mileage  which  counts,  is  of  more  value  that  a  mere  heterogeneous  aggregation  of  more 
or  less  ill-connected  parts.  The  Santa  Fe  system,  referring  to  map  22,  forms  roughly 
a  huge  triangle  with  one  corner  at  Kansas  City,  another  in  Texas  behind  Galveston, 
and  the  third  corner  not  far  from  Santa  Fe,  N.  Mex.,  at  Belen  Junction.  From  each 
comer  there  are  lines  out  to  strategic  gateways  on  the  confines  of  its  natural  territory. 
Northeast,  the  main  line  runs  into  Chicago.  Southerly,  the  line  reaches  the  Gulf  of 
Mexico  at  Galveston,  and' might  easily  be  extended  to  reach  it  again  at  New  Orleans. 
And  then  there  is  the  main  line  straight  thi-ough  from  the  western  angle  at  Belen 
Junction  to  Los  Angeles  and  San  Francisco.  Incidentally,  to  the  northwest  there 
is  also  the  line  into  Pueblo  and  Denver. 

63 1.  C.  C. 


ly 


.<rt 


^1 


*! 


606 


INTERSTATE   COMMERCE  COMMlfeSION   REPORTS. 


The  Santa  Fe  connection  into  Denver  is  significant,  historically.    The  oldest  por- 
tion of  the  system  is  the  line  from  the  Missouri  River  at  Kansas  City,  the  original 
base,  due  west  across  Kansas.    In  eastern  Colorado,  the  road  having  pointed  the  way 
for  population  to  foUow  across  the  plains,  dips  abruptly  to  the  south  at  La  Junta,  and 
follows  the  old  Santa  Fe  trail  down  into  New  Me^dco.    Only  afterward  was  the  spur 
to  Denver  conceived  of  as  a  logical  necessity.    In  other  words  the  finger  pointing  to 
Uie  Pacific  coast  was  directed  at  Santa  Fe  rather  than  across  Colorado.    This  old 
Santa  Fe  main  line,  with  its  high  grades,  is  still  employed  for  passenger  business,  but 
It  has  been  supplanted  for  freight  movement  by  the  direct  line  across  the  panhandle 
of  Texas.     The  construction  of  the  old  Santa  Fe  trail  line,  then,  constituted  the  first 
stage  in  ftie  growth  of  the  system.    The  second  stage  was  the  building  of  the  various 
ramifications  for  gathering  traffic  throughout  Kansas.    Then  came  the  panhandle 
line  across  Texas.    By  this  time,  transcontinental  ambition  is  apparent,  but  a  pre- 
liminary was  the  construction  of  the  line  into  Chicago.    This  in  effect  largely  contrib- 
uted to  the  disastrous  bankruptcy  in  1893.    This  tenuous  connection  by  an  air-line 
route  to  Chicago  missed  all  the  principal  cities.    It  gave  a  short  line,  to  be  sure,  but 
It  made  enemies  of  all  lines  east  of  the  Missouri  River,  transforming  them  from  con- 
nections  into  competitors.    Next,  in  order,  came  the  enterprise  of  pushing  through 
to  California,  and,  finally,  by  way  of  the  San  Joaquin  Valley,  reaching  San  Francisco 
Meantime  the  low-grade  line  across  the  panhandle  of  Texas,  with  a  maximum  gra- 
dient  of  0.6  per  cent  was  pushed  across  New  Mexico  to  effect  a  junction  with  the  original 
Santa  Fe  trail  at  Belen.    This  line,  as  aforesaid,  is  utilized  principally  for  freight 
In  due  time  came  the  southwestern  extension  to  match  up  with  the  Southern  Pacific 
line  to  New  Orleans.    And  then  at  last  the  Santa  Fe  pushed  its  way  out  to  the  Gulf 
at  Galveston.    Its  economic  83lf-sufficiency  was  still  further  assured,  theteafter  by 
building  into  the  1  umber  territory  of  eastern  Texas  and  Louisiana.    This  was  intended 
to  provide  return  loadings,  to  balance  the  predominant  eastbound  California  traffic 
What  more,  then,  can  a  system  so  widely  extended  and  yet  so  wisely  conceived 
need  to  render  it  an  equal  competitor  with  all  comers?    First  and  foremost   it  is 
evident  that  the  Santa  Fe  system  should  have  entrance  to  St.  Louis.    The  disposition 
altogether  too  much  in  evidence,  to  draw  traffic  into  Chicago  should  be  counteracted 
by  affording  a  direct,  more  southeriy  connection  to  the  Atlantic  seaboard.    AU  of  the 
eastern  trunk  line^by  this  consolidation  plan  are  brought  either  to  St  Louis  or  to  a 
gateway  intermediate  between  St.  Ix)uis  and  Chicago.    St.  Louis,  furthermore,  and 
the  gateways  in  its  neighborhood  afford  contact  with  all  of  the  lines  in  the  southeastern 
region.    There  are  several  ways  by  which  this  entry  for  the  Santa  Fe  into  St.  Louis 
might  be  effected.    One  would  be  over  the  Chicago  &  Alton,  with  joint  trackage 
along  with  the  Burlington  from  Mexico,  Mo.,  south  of  the  Mississippi,  not  crossing 
that  nver  at  Louisiana,  Mo.,  to  enter  St.  Louis  from  the  east.    This  proposal  indorsed 
by  the  traffic  department  of  the  Merchants'  Exchange  of  St.  Louis,  might  be  feasible 
except  that  the  Alton  is  already  preempted  as  a  Chicago  connection  for  the  St  Louis^ 
San  Francisco  system.    The  Santa  ^e  prior  to  the  war  had  already  planned  to  extend 
from  Carrollton,  Mo.,  down  the  river  to  new  construction  cooperatively  with  the 
Burlington  through  Mexico,  Mo.    The  Burlington,  it  appears,  planned  to  contract 
with  the  Wabash  for  its  line  east  of  Kansas  City  out  to  Carrollton,  and  inasmuch  as 
the  Wabash  and  tiie  Santa  Fe  already  jointly  operated  a  streteh  of  line  as  a  double 
track,  the  cooperative  enterprise  would  be  still  further  fostered.    The  right  of  way 
has  already  been  acquired  and  tiie  details  worked  out.    The  present  Santa  Fe  line 
could  be  used  for  nearly  half  the  distance;  whereas,  either  taking  trackage  on  the  Mis- 
souri Pacific  or  the  Alton  would  require  the  use  of  other  lines  practically  the  entire 
^tance.    In  effect  what  is  desired  is  a  new  low-grade  line  instead  of  tiie  present 
Wabash,  which  in  places  has  a  heavy  grade.    The  Santa  Fe,  having  already  low 
grades  to  Carrollton  will  probably  prefer  to  build  anew,  following  in  general  the  locar 
tion  of  the  Wabash.    Such  is  the  projected  line  as  shown  on  map  22. 

681.0.0. 


CONSOLIDATION   OF   RAILROADS. 


607 


The  next  most  important  supplementation  of  the  Santa  Fe  is  to  admit  it  to  New 
Orleans.  Map  22  shows  how  nearly  this  has  been  attained.  Obviously  an  evenly 
matched  competition  with  the  Southern  Pacific  calls  for  the  provision  of  this  last  link 
in  the  chain.  There  are  only  three  possibilities.  One  would  be  to  extend  the  present 
Louisiana  arm  to  the  Mississippi  River,  there  taking  trackage  on  the  Louisiana  Railway 
&  Navigation  Company  lines  (allocated  to  the  Frisco  system,  page  625  infra) .  Another 
would  be  over  the  rails  of  the  Texas  &  Pacific  from  Dallas.  But  the  Texas  &  Pacific  is 
the  New  Orleans  entrance  for  the  Missouri  Pacific  system.  The  third  election  follows 
the  present  course  of  traffic  interchange,  which  is  primarily  with  the  so-called  Gulf  Coast 
Lines.  This  railroad,  as  shown  on  map  22,  parallels  the  coast  and  all  across  Louisiana 
affords  the  most  feasible  connection.  It  is  recommended,  therefore,  that  the  line  from 
De  Quincy  east  be  merged  in  the  Santa  Fe  system.  The  portion  of  the  Gulf  Coast 
Lines  lying  west  of  State  Line,  Tex.,  is  elsewhere  (page  632)  assigned  to  the  Missouri 
Pacific  for  an  extension  of  its  system  into  southern  Texas.  It  should  be  said,  however, 
that  there  is  some  difference  of  opinion  within  the  Santa  Fe  management  as  to  the 
desirability  of  entry  into  New  Orleans.  It  has  been  felt  that  Galveston  was  the  natural 
point  of  export  for  the  products  of  Kansas,  Nebraska,  and  Oklahoma,  and  that  the 
acquisition  of  a  line  to  New  Orleans  would  only  result  in  the  diversion  of  traffic  which 
ought,  on  economic  grounds,  to  move  through  that  port.  Under  existing  arrangements, 
the  same  rate  on  wheat  \i  ould  obtain  to  both  ports,  so  that  the  additional  haul  to  New 
Orleans  would  yield  no  compensation  proportionately.  The  predicament  is  analogous 
to  the  plight  of  the  Oregon  Short  Line  at  Seattle  (page  590,  supra).  This  disability, 
it  is  submitted,  would  have  to  be  cleared  up  in  any  event  through  the  readjustment  of 
competitive  rates,  which  the  adoption  of  any  comprehensive  consolidation  scheme  is 
bound  to  entail. 

One  other  possibility  for  disposal  of  the  Gulf  Coast  Lines  remains.  Instead  of  cutting 
it  up,  merging  the  eastern  portion  with  the  Santa  Fe  for  an  entrance  into  New  Orleans, 
and  then  using  the  western  part  as  an  extension  of  the  Missouri  Pacific  (page  632,  infra), 
the  southern  half  might  conceivably  be  used  more  evenl>  to  match  the  Southern  Pacific 
with  the  Santa  Fe.  The  Southern  Pacific  is  to  have  the  San  Antonio  &  Aransas  Pass 
(map  23  and  page  604,  supra).  The  Gulf  Coast  Lines  compete  directly  in  this  same 
region.  Were  the  Santa  Fe  to  take  the  entire  Gulf  Coast  Lines  instead  of  a  part,  the 
complication  of  dismemberment  would  be  avoided,  and  a  matehed  competition  be- 
tween the  two  great  transcontinental  systems  in  southern  Texas  would  be  promoted. 
There  is  just  one  other  possibility.  The  San  Antonio  &  Aransas  Pass  might  be  lifted 
out  of  the  Southern  Pacific  system  altogether,  and  allocated  to  the  Frisco,  as  developed 
in  chapter  VI.  With  the  southwestern  half  of  the  Gulf  Coast  Lines  in  the  Missouri 
Pacific,  and  the  San  Antonio  &  Aransas  Pass  in  the  Frisco,  the  two  evenly  matched 
Southwestern-Gulf  systems  would  keenly  compete  with  one  another  clear  down 
through  the  southern  portion  of  Texas  to  the  Mexican  border.  There  is  some  merit  in 
the  suggestion;  but  on  the  whole  the  treatment  herewith  recommended  seems  prefer- 
able. Everything  turns  upon  whether  southern  Texa»LS  to  be  regarded  as  a  natural 
field  for  competition  between  the  two  Southwestern-Gulf  systems  or  between  the  two 
southwestern  transcontinental  systems.    Provisionally,  the  latter  choice  is  made. 

The  Colorado  &  Southern,  together  with  its  extension  across  Texas,  known  as  the  Fort 
Worth  &  Denver  City,  is  another  one  of  those  hybrid  properties  which  it  is  extremely 
difficult  to  allocate.  The  through  route  thereby  constituted  from  north  of  Cheyenne, 
Wyo.,  as  shown  on  map  16,  cuts  at  right  angles  across  all  the  east-and-west  lines  and 
tends  to  draw  traffic  from  the  far  northwest  down  to  the  Gulf  ports.  The  through  con- 
nection from  Fort  Worth  to  Galveston,  originally  planned,  was  to  consist  of  the 
Trinity  &  Brazos  Valley  Railroad.  This  route,  northwest  of  Fort  Worth,  is  now  part 
of  the  Burlington  system,  and  the  portion  southeast  of  Fort  Worth,  the  Trinity  & 
Brazos  Valley,  is  jointly  owned  by  the  Burlington  and  the  Rock  Island.    North  of 

63 1.  C.  C. 


II 


i 


608 


INTERSTATE  COMMERCE  COMMISSION  REPORTS. 


CONSOLIDATION  OF  RAILROADS. 


609 


« 


tl 


O 


Fort  Worth  the  system  betrayed  in  1917  a  considerable  earning  power.    The  Colorado 
&  Southern,  proper,  jdelded  a  net  operating  income  of  3.24  per  cent  even  on  the  high 
investment  account  of  $62,952  per  mile  of  line.    The  Fort  Worth  &  Denver  City  did 
much  better,  earning  7.34  per  cent  upon  a  corresponding  capital  account  of  $5(),732. 
The  Trmity  &  Brazos  Valby,  at  the  other  end,  even  with  a  low  investment  account  of 
$37,686  per  mile  of  line,  had  an  actual  deficit  of  2.09  per  cent  in  1917.    Evidently 
there  is  some  maladjustment  aa  to  interchange  of  traffic  at  various  points  along  this  line 
especially  evidenced  by  the  barren  results  for  the  southern  link  into  Galveston      It  i^ 
alleged  that  the  Fort  Worth  &  Denver  City  is  peculiarly  profitable  because  of  an  ex- 
cessive division  of  the  through  rates.    The  traffic  throughout  is  light— no  lumber,  ore. 
coal— although  there  is  a  considerable  movement  of  beet  sugar  and  vegetables  from 
Colorado  to  Texas.    There  are  no  large  cities  and  no  manufactures,  but  of  late  there 
has  been  some  movement  of  oil.    It  is  a  dry  territory,  bare  agriculturally,  even  at  the 
southern  end.    The  heaviest  movement  is  of  live  stock  and  on  this  the  rate  is  unre- 
munerative.     It  it  alleged  that  the  Colorado  &  Southern  system,  owing  to  its  unique 
location  and  enjoying  a  monopoly  between  Denver  and  the  Gulf  direct,  is  artificially 
prosperous  because  of  prorating  maladjustment,  and  that  a  revision  of  percentages  on 
interchanged  business  will  substantially  lessen  its  profits.    But  for  the  present,  at  all 
events,  it  is  obvious  that  one  has  to  do  with  a  fairiy  strong  Une,  of  vital  importance 
nationally,  and  yet  which  is  so  located  that  it  is  neither  an  east-and-west  transcon- 
tinental road  nor  one  havingeverything  in  common  with  the  Southwestern-Gulf  roads. 
Four  possible  dispositions  may  be  made  of  the  Colorado  &  Southern  svstem,  as  above 
described.     It  is  now  an  integral  part  of  the  BurUngton  system  (map  1*6)  and  might  so 
remain  under  this  plan.    Were  the  Chambers  plan  (page  563,  siipra),  or  anything  like 
it,  to  be  adopted  for  utilizing  the  Santa  Fe  as  the  stem  of  a  middle-group  transconti- 
nental system  (map  22),  matched  against  the  Union  Pacific,  the  Colorado  &  Southern 
would  naturally  play  a  leading  part  therein.    But  with  the  rejection  of  tlie  Santa  Fe 
in  favor  of  the  Burlington  for  this  purpose,  the  Colorado  &  Southern  would  lose  its  main 
value  to  the  Santa  Fe  system.    A  third  disposition  would  be  to  incorporate  it  in  the 
Southern  Pacific-Rock  Island  group.    Its  possible  place  therein  is  lightly  dotted  on 
map  23,  and  the  advantages  and  defects  of  this  arrangement  must  be  carefully  consid- 
ered.   A  fourth  utilization,  and  one  which  has  great  force  and  merit,  is  that  the  Colo- 
rado &  Southern  should  be  treated  as  appurtenant  to  the  Southwestern-Gulf  railroads, 
rather  than  as  a  part  of  any  transcontinental  system.    This  suggestion  is  based  upon 
such  sound  operating  reasons  that  it,  too,  must  be  canvassed  attentively.    The  choice, 
in  fact,  narrows  down  to  these  last  three  possibilities.    For  the  first  one,  namely,  that 
it  should  remain  as  a  constituent  part  of  the  Burlington,  must  be  rejected  on  general 
grounds,  of  far-reaching  significance.    According  to  map  16,  the  Colorado  &  Southern, 
as  a  part  of  the  Buriington,  obviously  extends  its  rails  far  beyond  any  gateway  set  for 
the  competitors  of  that  system.    As  elsewhere  described  in  connection  with  the  affairs 
of  the  Kansas  City  Southern  and  of  the  Union  Pacific  (pages  142,  166)  the  proposition 
has  been  broached  of  using  the  former  as  a  Gulf  outlet  for  the  great  Union  Pacific 
system.    There  is  force  in  the  suggestion ;  l>ut  it  is  rejected  because  of  the  need  of  con- 
serving the  earning  power  of  the  Southwestern-Gulf  properties,  in  order  to  enable 
them  to  carry  the  heavy  burden  of  their  network  of  branches  and  feeders.    And  unless 
the  Kansas  City  Southern  or  some  other  through  line  to  the  Gulf  were  made  a  part  of 
the  Union  Pacific  system,  the  Burlington,  matched  against  it  point  by  point,  ought 
likewise  to  withdraw  from  entry  into  the  Gulf  territory.    There  are  other  minor  con- 
siderations, such  as  the  already  excessive  mileage  within  the  Burlington  system,  as 
compared  with  all  the  rest;  but  the  really  conclusive  reason  for  withdrawal  of  the 
Colorado  Southern  has  to  do  with  the  general  balance  of  power,  as  above  described. 

The  Colorado  &  Southern  system,  incorporated  in  the  Santa  Fe,  would  bring  to 
fruition  plans  carefully  developed  by  the  late  E.  P.  Ripley.    No  possible  question 

63I.C.C. 


about  its  value  to  this  system  exists,  provided  that  the  Denver  &  Rio  Grande  and 
Western  Pacific  were  also  merged.  But  without  these  last-named  properties,  the  only 
value  of  the  Colorado  &  Southern  would  arise  from  its  contacts  with  Colorado  common 
points.  And  with  most  of  these  the  Santa  Fe  already  has  connection  over  its  own  rails. 
The  Santa  Fe  also  has  its  own  Gulf  line;  so  that  it  would  have  no  use  for  the  Colorado  & 
Southern,  independently  of  the  Ogden  gateway,  for  this  purpose.  To  allocate  the 
Colorado  &  Southern  to  the  Santa  Fe  solely  with  reference  to  its  utilization  as  a  short 
cut  to  the  Gulf  would,  in  effect,  put  an  end  to  the  competition  which  now  exists 
between  it  and  the  Santa  Fe.  In  view  of  the  absence  of  prime  advantage  to  the  Santa 
Fe,  therefore,  and  of  this  manifest  disadvantage,  under  the  express  terms  of  the  statute, 
the  project  of  Santa  Fe  aflfiUation  is  ruled  out.  'Considering,  next  in  order,  the  feasi- 
bility of  assigning  the  Colorado  &  Southern  to  the  Rock  Island-Southern  Pacific* 
system,  inspection  of  map  23  brings  out  the  value  it  might  possees  from  tying  in  the 
loose'^stub  end  of  the  Rock  Island  at  Denver.  This,  as  has  already  been  pointed  cut, 
is  left  isolated  and  possibly  unproductive,  except  for  local  business,  by  the  provisions 
of  the  general  plan  for  transcontinental  systems  herewith  proposed.  There  are  sub- 
stantial supporting  reasons  for  transferring  the  Colorado  &  Southern  to  this  system. 
Among  these  are  the  following:  The  Colorado  &  Southern  has  some  good  local  Colorado 
territory  which  would  serve  as  a  much  needed  feeder  for  the  Rock  Island's  Denver  line. 
Included  hereunder  might  be  especially  mentioned  the  coal  production  about  Trini- 
dad, serviceable  both  for  locomotive  and  commercial  use.  The  Colorado  &  Southern 
might  also  be  utilized  in  place  of  the  existing  onerous  trackage  contract  with  the 
Denver  &  Rio  Grande,  covering  the  line  between  Pueblo  and  Denver — perhaps  also 
the  Union  Pacific  trackage  between  Limon  and  Denver.  Rock  Island  f  re^ht,  and 
possibly  passenger  trains,  to  and  from  Denver  might  be  routed  via  Colorado  Springs. 
In  that  event  a  most  burdensome  contract  might  be  eliminated.  A  larger  interchange 
of  traffic  at  Amarillo  between  Colorado,  north  and  east,  and  Oklahoma  and  Arkansas, 
including  the  territory  now  served  through  the  Memphis  gateway,  together  with  a 
closer  working  relationship  between  the  Morgan  steamship  line,  as  part  of  the  Southern 
Pacific,  and  the  Colorado  &  Southern  system,  would  be  supported  and  distinctly 
encouraged  by  this  relationship.  And  the  extensive  mileage  of  the  Southern  Pacific 
in  Texas  and  Louisiana  might  originate  tonnage  which  could  be  moved  northwest  by 
this  line  rather  than  by  way  of  the  Missouri  Pacific.  An  objection,  on  the  other  hand, 
would  be  that  the  inclusion  of  the  Trinity  &  Brazos  Valley  in  the  Rock  Island-Southern 
Pacific  system  would  put  an  end  to  the  present  competition  with  the  parallel  route  of 
the  Houston  &  Texas  Central  line.  This  road  now  connects  Houston  and  Fort  Worth 
over  Southern  Pacific  rails.  Unless  the  Trinity  &  Brazos  Valley  therefore  went  else- 
where, notably  to  the  Frisco,  as  elsewhere  suggested  (map  25),  this  conflict  with  the  pro- 
vision of  the  transportation  act  might  be  a  source  of  embarrassment.  If  it  be  objected 
that  the  addition  of  the  Colorado  &  Southern  system  to  the  Rock  Island-Southern 
Pacific,  instead  of  the  Santa  Fe,  is  prejudicial  to  the  evenly  matched  competition  which 
is  intended  to  prevail  between  these  two  systems,  it  may  be  added  that  the  Santa  Fe, 
by  means  of  a  little  construction,  could  practically  parallel  this  route  from  end  to  end. 
This  possibility  is  shown  by  a  dotted  line  on  map  22.  Such  a  route  would  consist  of 
trackage  over  the  El  Paso  &  Southwestern  side  line  between  French  and  Tucumcari, 
N.  Mex.  (incidentally,  the  Rock  Island  probably  could  not  entirely  spare  so  important 
an  artery  for  company  fuel),  a  bit  of  new  construction  from  there  on  to  Texico,  and 
thence  over  the  Santa  Fe's  own  rails  direct  to  Galveston.  The  little  gap  between 
Pueblo  and  Trinidad  could  be  readily  bridged  by  trackage  taken  from  the  Colorado  & 
Southern.  At  present,  of  course,  there  is  hardly  business  enough  for  one  Une,  certainly 
not  for  the  two  which  would  hereby  be  set  up.  But  the  possibility  of  such  a  route 
within  the  Santa  Fe  system  in  the  remote  future  is  not  to  be  gainsaid. 

63 1.  C.  C. 


4. 


610 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


#? 


f 


On  the  whole,  rejecting;  the  allocations  above  described,  there  remainP  for  the 
Colorado  A  Southern  only  the  possibility  of  ite  transference  from  the  Burhngton 
aystem  to  tliat  of  the  Missouri  Pacific.     The  underiying  reason,  based  upon  the 
broadest  considerations  for  so  doing,  is  that  this  strategic  line  would  oe  thereby  neu- 
traUzed,  in  effect,  as  between  the  two  middle-group  transcontinental  svrstems.    As 
proposed  under  this  plan,  the  Roclc  Islanr.-Southem  Pa-ifin  svtem  wilf  have  other 
hnes  to  connect  the  whole  of  Califomia  and  Oregon  and  practically  all  Louisiana 
and  lexas  points.    It  will  have  a  dire<  t  line  from  Memphis  through  Arkansas  and 
Oklahoma,  with  a  direct  line  from  St.  Louis.    The  Santa  Fe  svstem  likewise  serves 
the  same  temtones,  with  the  exception  of  Memphis  and  Arkansas.    But  both  these 
systems  are  interested  solely  in  the  El  Paso  or  Arizona  gatewavs.    A  prime  purpose 
of  the  entire  Central  Pacific  readjustment  is  to  render  the  Ogden  routes  truly  com- 
petitive with  the  southern  ones     Xferging  the  Colorado  &  Southern  with  either  of 
tiiese  transcontinental  systems  therefore  would  still  leave  the  incentive  to  work 
business  by  the  southern  rather  than  the  middle  routes.    For  the  Colorado  &  Southern 
in  either  hands  would  only  afford  them  a  short  haul  through  Denver,  as  against  a 
long  haul  through  Arizona.    Such  disposition  therefore  would  ine\ntably  tend  to 
dry  up  a  verv-  important  competitive  artery.    Both  the  Union  Pacific  and  the  Bur- 
lington are  entitled  to  participate  competitively  in  this  business.    To  place  the 
Colorado  &  Southern  then,  in  neutral  hands,  like  either  the  Missouri  Pacific  or  Frisco 
^sterns,  would  afford  adequate  through  connection  between  the  territories  described. 
Besides  protecting  the  middle-group  transcontinental  lines,  it  would  also  protect 
^e  Gulf-Southwestern  lines.     For  both  the  Burlington  and  the  Union  Pacific  would 
thus  be  rendered  dependent  upon  these  roads  in  order  to  reach  Texas  and  Louisiana 
by  a  direct  haul     A  trading  basis  would  thereby  be  set  up  which  would  manifestly 
be  to  the  advantage  of  the  Gulf-Southwestern  roads.    Perfectlv  neutral  support, 
coupled  with  competitive  opportunity,  would  be  created  for  both  the  connections 
through  Ogden.    The  Gulf-Southwestern  roads,  with  various  loose  ends  of  rail  ex- 
tending into  Colorado,  and  always  threatened  with  starvation  through  diversion  of 
business  from  the  northwest  to  the  Arizona  gateways,  would  be  prevented  from 
being  bottled  up  in  one  comer  of  the  United  States.    And  on  top  of  this,  accordin^^^ 
to  the  showing  for  1917,  the  Colorado  &  Southern  lines  south  of  Denver  would  mat^ 
nally  contribute  financial  strength.    The  proposal  is  not  without  disadvantage, 
however,  and  this  illustrates  how  difl^icult  it  is  to  think  in  terms  of  widespread  con- 
Bohdation  which  so  completely  upsets  all  existing  traffic  interchange.    Putting  the 
Colorado  &  Southern  sj-stem  into  the  Missouri  Pacific  group  would  end  the  quite 
keen  competition  which  now  exists  with  the  competitive  route  of  the  Kansas  City 
Southern.    For  it  will  be  remembered  that  this  road,  herein  assigned  to  the  Missouri 
Pacific  system,  is  now  a  perfect  connection  for  the  Union  Pacific,  in  fact  the  Marys- 
viUe,  Kans  ,  cut-off  was  in  large  measure  assumed  in  order  to  develop  this  route. 
And  then  another  disadvantage,  unquestionably  is  that  this  proposal  tends  to  upset 
the  quite  perfect  balance  of  earning  capacity  between  the  Frisco  and  the  Missouri 
Pacific,  which  has  been  worked  out  in  chapter  VI.     Of  the  two  Gulf-Southwestern 
systems,  the  Missouri  Pacific  is  abeady  the  larger.    Whether  it  is  financially  stronger 
18  somewhat  problematical.    And  the  inclusion  of  the  Colorado  &  Southern  sj-stem 
would  tend  to  disturb  this  equipoise.    But  nevertheless,  for  the  several  reasons  herein 
outhned,  as  well  as  further  developed  in  chapter  VI,  this  recommendation  for  its 
transfer  to  the  Missouri  Pacific  sj-stem  seems  preferable  to  all  of  the  others. 

Certain  minor  additions,  not  affecting  the  Santa  Fe  in  anv  large  way,  are  also 
recommended.  None  of  them  will  appreciably  influence  the  financial  status,  although 
certain  ones  may  be  considered  as  liabilities  which  must  be  more  or  less  shared  by 
everybody  in  order  to  save  the  general  situation.  The  first  is  the  merger  of  the 
Kansas  branch  of  the  Missouri  Pacific  from  Atchison  to  Lenora,  Kans.,  the  north- 

68 1. 0.  C. 


CONSOLIDATION   OF  RAILROADS. 


611 


and-south  branch,  however,  from  Concordia  up  to  Hastings  is  allocated  to  the  Rock 
Island,  as  its  inclusion  here  would  merely  consolidate  two  parallel  and  competing 
lines.  The  effect  of  this  transfer^will  be  to  consistently  make  the  Santa  Fe  a  Kansas 
network  of  local  lines.  Another  change,  subsequently  discussed  in  chapter  VI.  is 
the  transfer  of  the  Santa  Fe  branch  from  Dallas  to  Paris,  Tex.,  to  the  Frisco  system. 
This  now  is  a  part  of  the  Gulf,  C/olorado  &  Santa  Fe.  the  Texas  subsidiary  in  the  Santa 
Fe  system.  This  transfer  would  encourage  the  utilization  of  this  stretch  as  part  of 
a  main  line  rather  than  as  a  branch  which  trends  nowhere  in  particular,  within 
the  Santa  Fe  system.  In  the  same  connection  in  chapter  VI  the  recommendation 
is  made  that  the  Fort  Worth  &  Rio  Grande,  running  southwest  from  Fort  Worth  as 
a  subsicliary  of  the  Frisco  system,  be  assigned  to  the  Santa  Fe.  Map  22  shows  that 
this  would  afford  a  more  direct  entrance  'rom  the  west  to  Fort  Worth  instead  of 
passing  around  two  sides  of  a  triangle.  The  objection  of  course  is  that  a  still  shorter 
line  from  the  west  might  strike  off  from  the  Santa  Fe  further  out,  and  such  a  line  is 
is  said  to  have  been  considered.  But  for  the  present,  at  least,  it  appears  as  if  the 
Fort  Worth  &  Rio  Grande  would  answer  the  purpose,  and  would  result  in  a  more 
effective  utilization  of  what  is  now  an  unprofitable  branch  in  the  Frisco  system. 
The  suggestion  has  also  been  made  that  the  Missouri  &  North  Arkansas  should 
also  be  included  in  the  Santa  Fe,  together  with  trackage  into  Memphis  from  Brinkley 
over  the  Rock  Island.  This  would  give  the  Santa  Fe  a  bridge  line  over  the  Ozarks 
from  the  Kansas  wheat  fields  into  the  southern  states  east  of  the  Mississippi.  The 
suggestion  contains  the  possibility  of  caring  for  a  weak  independent  line  through 
merger  in  a  strong  system.  The  Santa  Fe  is  probably  better  able  to  carry  it  than 
the  Frisco,  and  no  other  sponsors  are  in  sight.  But  the  property  really  ought  to  be 
abandoned  to  the  care  of  its  local  constituency,  like  so  many  others  of  its  kind;  as, 
in  fact,  since  writing  the  foregoing,  it  has  been  discontinued  for  operation  by  the 
receiver,  leaving  five  counties  in  Missouri  absolutely  without  railroad  connection 
with  the  outside  world. 

The  feasibility  of  the  foregoing  proposals  must  now  be  tested,  first,  as  respects  the 
continuance  of  competition,  and,  secondly,  with  regard  to  the  uniformity  of  earning 
power.  Unless  these  two  essentials  are  met,  the  general  plan  can  not  stand  fire  under 
criticism.  As  to  the  former,  the  perpetuation  of  competition,  the  most  satisfactory 
test  is  graphic.  A  series  of  maps  is  submitted  herewith  (maps  19,  20,  21,  and  24) 
upon  which  these  five  transcontinental  systems  are  shown  in  pairs.  And  each  of 
the  significant  couples  is  separately  displayed.  In  order  to  facilitate  this  compariEon 
and  to  complete  a  composite  picture,  moreover,  the  same  graphic  designations  are 
employed  for  each  system  throughout  the  series  of  maps.  One  may  thus  by  eye  carry 
across  and  compare  impressions  from  map  to  map,  until  the  entire  situation  is  envis- 
aged. But  no  attempt  has  been  made  to  match  the  two  southern  systems,  the  Santa 
Fe  and  the  Rock  Island-Southern  Pacific,  with  the  three  northern  systems  for  two 
reasons.  One  is  that  there  is  an  obvious  superfluity  of  competition  from  interlocking 
of  all  five  systems  between  the  Missouri  River  gateways  and  Chicago.  The  other  is 
that  west  of  Kansas  City,  the  two  southern  systems  break  so  entirely  loose  from  the 
rest  that  their  problems  thenceforth  are  separate  and  apart.  Only  is  there  a  slight 
overlying  where  the  Rock  Island  system  gridirons  Iowa.  These  four  maps  are  so 
self-evident  in  purpose  that  no  elaborate  comment  is  necessary.  All  that  seems  to  be 
called  for,  is  a  running  commentary  upon  the  general  layout.  The  ramifications  of 
the  Burlington-Northern  Pacific  system  as  against  the  St.  Paul-Great  Northern  are 
depicted  on  map  19.  The  zone  within  which  the  two  compete  is  quite  localized 
along  the  Canadian  border  states  and  down  through  Iowa,  Minnesota,  and  Wisconsin. 
Within  this  zone  and  particularly  in  the  far  northwest  the  two  systems,  as  amplified,, 
match  almost  point  for  point.    At  the  eastern  end  the  St.  Paul-Great  Northern  is 

63 1.  C.  C. 


•i 


»li 


II 


612 


INTERSTATE   COMMERCE   COMMISSION  REPORTS. 


free  from  this  particular  Burlington- Northern  Pacific  rivalry,  in  Wisconsin  and  the 
northerly  strip  of  North  Dakota  and  Montana.  But  within  these  particular  locaUties 
as  the  other  maps  make  manifest,  competition  in  abundance  is  provided  throughout 
\\  isconsin  by  the  Union  Pacific-North  Western  system.  It  is  only  in  the  upper 
tnird  of  North  Dakota  that  anything  approaching  a  monopoly  by  the  St.  Paul-Great 
.Northern  system  appears.  And  setting  off  the  Soo  from  this  group,  treating 'it  as  a 
foreign  line,  would  meet  this  difficulty..  This  same  monopoly  extends  across  Montana 
from  end  to  end.  But  it  is  submitted  that  this  in  itself  is  a  necessary  compensation 
for  the  other  handicaps  under  which  this  particular  system  must  operate.  The  fore- 
going fmancial  analysis  evidences  that  this  group  is  compelled  to  carrv  the  load  of  a 
far-flung  bridge  line,  and  that  all  along  between  the  twin  cities  and  Pacific  coast 
points  It  lies  out  on  the  edge  of  things.  Special  favor  and  encouragement  ought  to 
be  given  to  all  of  these  marginal  systems  in  order  to  even  things  up. 

P^ing  next  in  series  to  map  20,  the  Burlington  system,  by  means  of  an  identical 
graphic  designation,  is  shown  in  juxtaposition  to  the  remaining  northern  transconti- 
nental system,  that  of  the  Union  Pacific-North  Western.  In  this  instance  the  rivalry 
of  the  two  is  more  widely  disseminated,  embracing  as  it  does  not  only  the  northwest 
but  the  Ogden  gateways  to  San  Francisco.  Two  almost  perfectly  matched  routes 
obtam  between  Chicago  and  the  Golden  Gate  direct,  and  also  two  routes  passing 
through  Kansas  City  and  Omaha  and  penetrating  the  far  northwest,  in  the  one  case 
across  Idaho  via  Boise  or  Butte,  while  by  the  Burlington  route  the  contact  is  estab- 
lished by  way  of  Billings,  Mont.  The  coextensive  rivalry  at  the  eastern  end  between 
these  two  systems,  according  to  this  map,  Ues  in  the  main  south  of  St.  Paul  down  to 
Kansas  City.  All  about  the  periphery  on  the  other  hand,  taking  Omaha  as  a  center, 
such  competition  as  exists  must  proceed  from  other  combinations,  which  will  be 
displayed  on  the  succeeding  maps.  Wisconsin,  again,  is  portrayed  without  rivalry 
from  this  particular  combination,  and  Colorado  likewise  is  evidently  monopolized. 
Each  of  these,  however,  as  it  will  appear,  is  touched  in  another  connection  by  the 
remaining  systems. 

The  third  possible  juxtaposition  of  northern  groups  is  displayed  by  map  21.    This 
exhibits  the  Union  Pacific-North  Western  system  pitted  geographically  against  the 
St.  Paul-Great  Northern.     No  longer  is  there  rivalry  through  the  Ogden  gateway, 
but  competition  is  evidently  perpetuated  for  the  far  northwest  by  at  least  two  routed 
in  every  important  instance.    Here  at  last  the  neces8ar>-  competition  throughout 
Wisconsin  is  afforded,  together  with  the  necessary  interweaving  across  South  Dakota. 
And  It  goes  without  saying,  of  course,  that  the  field  south  of  the  twin  cities  is  well 
provided  with  a  crisscross  of  lines.    Taking  the  series  thus  far,  the  only  region  wherein 
substantial  monopoly  will  prevail  is  along  the  marginal  strip  bordering  Canada,  across 
North  Dakota  and  Montana,  in  southern  Colorado,  and  down  along  the  line  of  the 
Los  Angeles  &  Salt  Lake  road.    There  is  comfort,  however,  in  the  consideration  that 
withm  these  last-named  zones,  conditions  as  respects  competition  will  continue  no 
worse  than  as  at  present.    They  are  in  no  wise  affected  by  this  consolidation  plan, 
with  the  sole  exception  of  northern  North  Dakota.    It  must  be  confessed  that  the 
merger  of  the  Soo  system  in  that  of  the  St.  Paul-Great  Northern  puts  an  end  to  the  pre- 
existing rivalry.    As  for  Colorado  and  the  San  Pedro  lines,  such  competition  as  may 
develop  must  be  had  not  from  these  northern  transcontinental  railways  but  from  those 
which  pass  by  way  of  the  Arizona  and  New  Mexico  gateways. 

The  conditions  set  up  under  this  plan  for  an  evenly  matched  rivahy  via  the  southern 
transcontinental  gateways  appear  upon  map  24,  and  here,  as  already  prophesied, 
an  almost  perfectly  even-handed  geographical  layout  obtains.  The  two  through 
routes  run  side  by  side  clear  through  from  Chicago  to  northern  California.  Note,  by 
the  way,  the  two  stub  end  lines  into  Denver,  which  must  continue  to  draw  a  liveli- 
hood from  distinctively  C  olorado  business.    The  two  systems  of  the  Santa  Fe  and  the 

63 1.  C.  C. 


CONSOLIDATION   OF   RAILROADS. 


613 


Rock  Island-Southern  Pacific  alike  gridiron  Texas,  Oklahoma,  and  southern  Louisiana. 
The  only  divergencies  appear  in  the  Rock  Island  lines  across  Iowa  and  in  the  Choctaw 
division  of  the  Rock  Island  into  Memphis.  Here  are  two  territories  from  which  the 
Santa  P'e  is  at  present  excluded.  From  the  northern  region  up  to  St.  Paul  the  Santa 
Fe  is  perhaps  as  well  off  to  be  free  of  this  complication.  Down  to  Memphis,  if  it  be 
given  the  Missouri  &  North  Arkansas,  an  inlet  to  the  southeastern  states  may  be 
said  to  be  afforded.  By  and  large,  with  these  minor  exceptions  above  noted,  it  is 
believed  that  such  a  substantial  matching  of  one  system  against  the  other  is  afforded 
as  may  satisfy  the  requirements  in  this  regard  of  the  transportation  act. 

The  second'  test  to  be  applied  to  the  proposed  layout  for  the  western  transcontinental 
systems  is  that  of  uniformity  of  financial  return.  The  appended  exhibits,  conformably 
to  the  system  elsewhere  adopted,  based  upon  1917,  display  the  results.  Summarily, 
they  are  as  follows  for  the  five  proposed  systems. 


System. 


Union  Pacific-North  Wftstern 
Burlington-Northern  Pacific. 

St.  Paul-Great  Northern 

Rock  Island- Southern  Pacific 
Santa  Fe 


Road  and 
equipment 
invest- 
ment per 
mile  of 
line. 


S67,656 
64,4a3 
61,304 
68,680 
65,582 


Percentage 
relation; 
net  operat- 
ing income 
to  invest- 
ment. 


Per  cent. 
0.55 
5.39 
5.62 
4.69 
5.64 


The  fair  degree  of  uniformity  in  earning  capacity  based  upon  capital  account  as  repre- 
sented in  this  exhibit  is  self-evident.  The  variation  in  fact  is  so  much  less  than  the 
probable  deviation  of  the  investment  account  from  federal  valuation,  as  to  bring  the 
returns,  it  is  believed,  well  within  the  requirements  of  the  statute.  Not  until  finally 
checked  by  valuation,  as  more  fully  discussed  in  the  recapitulation,  is  anything 
approximating  precision  possible  in  the  way  of  a  check  or  test. 

63  I.  C.  C. 

6376.3—21 11 


I 


614 


11 


INTERSTATE   COMMERCE   COMMISSION  REPORTS. 
Chapter  VI. — Southwestern-Gulf  Region. 


CONSOLIDATION   OF   RAILROADS. 


615 


The  territorj'  bounded  and  described,  614.— Its  transportation  problems  not  properly 
transcontinental,  615.— Nature  of  the  traffic,  615.— Many  small  independent 
roads,  616.— Many  of  them  precarious  financially,  616.— Statistical  data,  617. — 
Confusion  incident  to  separate  incorporation  and  financing  of  the  Texas  prop- 
erties, 617. 

National  interest  in  short  hauls  to  the  Gulf,  618.— Final  choice  for  main  stems  of  two 
local  systems,  Frisco  and  Missouri  Pacific,  respectively,  619.— Shall  they  extend 
into  Chicago,  619?— Detailed  comparison  with  southeastern  conditions,  619.— 
Southwestern  lines  in  relation  to  primary  markets,  621. 

The  St.  Louis-San  Francisco  Railway  system  described,  621.— Its  comparative 
financial  strength,  622.— Its  operating  characteristics  improved  by  an  exchange 
with  the  Santa  Fe,  622.— Plight  of  the  Kansas  City,  Clinton  &  Springfield  Rail- 
way,  623.— The  Missouri,  Kansas  &  Texas  included,  623.— St.  Louis  South- 
western divided  with  the  Rock  Island,  624.— New  through  routes  to  the  Gulf 
provided  from  St.  Louis  and  Kansas  City,  625.— Galveston  as  well  as  New 
Orleans  considered,  626.— The  Kansas  City,  Mexico  &  Orient  divided  at  Altus, 
626.— The  Vicksburg,  Shreveport  &  Pacific  admits  into  Louisiana  territory, 
626.— The  Chicago  &  Alton  for  entry  into  Chicago,  627. 

The  Missouri  Pacific  system  as  now  constituted,  628.— Its  financial  and  operating 
status,  629.— Imperative  need  of  a  direct  line  t-o  the  Gulf  satisfied  by  including 
the  Kansas  City  Southern,  629.— Financial  advantages  incident  thereto,  629.— 
New  low-grade  detour  via  Kansas,  Oklahoma  &  Gulf,  which  is  therefore  mcluded, 
629.— The  Louisiana  &  Arkansas  and  the  Fort  Smith  &  Western  as  minor  addi- 
tions, 630.— The  Texarkana  &  Fort  Smith  as  well  as  other  Texas  subsidiaries 
considered,  630.— Shall  the  Omaha  line  and  the  Kansas  branch  be  left  undis- 
turbed, 630.— And  what  about  the  Colorado  division  into  Pueblo,  631?— Possible 
dispositions  of  the  Colorado  &   Southern,  -.—Fort  Worth  &  Denver  City  line, 
631.— Relation  to  the  Gulf  Coast  Lines,  as  allocated  to  the  Santa  Fe,  632.— A 
Chicago  entrance  provided  by  merger  of  western  line  of  the  Chicago  &  Eastern 
Illinois,  633. 
Summary  comparison  of  -the  two  Southwestern-Gulf  systems  (map  26-A)  as  above 
constituted,  633. — Statistical  comparison  of  the  two  systems  as  evenly  matched 
competitors,  634. 

The  railroads  operating  in  the  great  sector  of  southwestern  territory  lying  between 
the  Mississippi  River  and  the  main  lines  of  the  Santa  Fe  and  the  Southern  Pacific- 
Rock  Island  transcontinental  systems,  are  possessed  of  a  sufficient  individuality  to 
require  that  they  be  treated  as  an  independent  group.  This  region  is  bounded  on 
the  north  by  the  Missouri  River  between  St.  Louis  and  Kansas  City  and  upon  the 
south  the  boundary  is  set  by  the  Gulf  and  the  Mexican  frontier.  The  physical 
geography  must  be  understood  in  order  to  interpret  rightly  the  relationship  between 
the  several  carriers  operating  therein.  The  territory  is  divided  east  and  west  by  the 
Ozark  mountain  range  and  its  foothills.  These  highlands,  sparsely  populated  and  of 
relatively  slight  traffic  importance,  extend  from  southern  Missouri  pretty  well  across 
Arkansas  down  to  the  Red  River  Valley  on  the  southern  boundary  of  Oklahoma.  In 
other  words,  northwestern  Arkansas  and  eastern  Oklahoma  as  well  as  southern 
Missouri,  while  penetrated  by  fertile  valleys— that  of  the  Arkansas  River,  for 
example— are  little  inviting  for  railroad  development.  The  result,  as  shown  by  both 
maps  25  and  26,  is  that  the  great  railway  systems  avoid  this  highland  territory,  except 

G3  I.  C.  C. 


for  certain  bridge  lines.  From  Kansas  City  and  St.  Louis,  therefore,  there  radiate 
certain  systems  which  either  split  into  two  distinct  halves  east  and  west  of  the  Ozark 
highlands,  or  else  confine  their  activities  entirely  to  one  or  the  other  flank  of  these 
uplands.  In  the  former  group  is  the  Frisco  system  (map  25),  mainly  lying  west  and 
north;  and  the  Missouri  Pacific  (map  26),  widely  extended  on  both  sides,  with  certain 
bridge  lines  thrown  across.  All  the  other  railways  except  these  two  operate  exclusively 
on  one  side  or  the  other  of  the  Ozarks.  The  Missouri,  Kansas  &  Texas  (map  25), 
fomiliarly  known  as  the  Katy,  and  so  designated  hereafter  for  purposes  of  convenience, 
spreads  out  to  the  west  and  south  from  Kansas  City  down  to  Texas  (map  25);  the 
Kansas  City  Southern  (map  26),  an  air  line  straight  south  to  the  Gulf  from  Kansas 
City,  only  cuts  across  the  southern  tip  of  the  Ozark  highlands;  and  the  St.  Louis  South- 
western (map  25),  commonly  known  as  the  Cotton  Belt,  skirts  the  Ozarks  down  the 
Mississippi  Valley,  only  swinging  west  well  south  of  Little  Rock,  Ark.,  where  open 
country  occurs.  Beside  these  properties,  there  remain  for  consideration  only  the 
goodly  number  of  lesser  roads  constituting  the  network  of  lines  in  Texas  and  Louis- 
iana, such  as  the  Texas  &  Pacific  (map  26)  and  the  International  &  Great  Northern; 
the  Kansas  City,  Mexico  &  Orient  (maps  25  and  26);  the  Louisiana  Railway  &  Navi- 
gation Company  (map  2G);  and  the  so-called  Gulf  Coast  Lines  (map  22). 

All  of  the  railroads  al>ove  enumerated,  operating  in  the  Southwestern-Gulf  region, 
possess  certain  characteristics  in  common.  The  more  important  lines  are  based  upon 
Kansas  City  and  St.  Louis  in  so  far  as  they  have  been  built  from  the  north  down, 
following  the  spread  of  population.  But  they  are  nearly  all  dependent,  like\\ise,  not 
alone  upon  business  in  and  out  of  these  Missouri  River  gateways,  but  upon  their 
relation  to  the  Gulf  ports.  They  have  had  in  the  past  a  certain  interest  in  trans- 
continental traffic,  but  only  in  so  far  as  the  Southern  Pacific  Company  ha.s  utilized 
them  as  a  connection  through  to  the  Missouri  River  gateways.  And  the  Southern 
Pacific  has  rather  consistently  cultivated  these  connections  iu  preference  to  the 
obAious  and  short  lines — the  Rock  Island,  for  instance — because  of  the  longer  Southern 
Pacific  haul  resulting  therefrom.  The  extreme  instance  is  afforded  by  the  policy 
developed  under  the  Harriman  regime  of  shipments  to  central  freight  association 
territory  from  southern  California  by  way  of  New  Orleans  and  the  Illinois  Central. 
This  roundabout  carriage  thus  kept  the  traffic  entirely  within  the  Harriman  systems. 
Elsewhere,  in  chapter  V,  in  connection  with  the  Rock  Island-Southern  Pacific  combi- 
nation, other  illustrations  of  this  roundabout  routing  are  cited,  such  as,  for  example, 
the  connection  at  Sierra  Blanca  with  the  Texas  &  Pacific,  and  at  Alpine  with  the 
Kansas  City,  Mexico  &  Orient.  The  economic  waste  involved  in  such  indirect  car- 
riage is  bound  to  be  emphasized  under  the  keen  competition  now  engendered  with  the 
Panama  Canal  and  the  new  American  merchant  marine.  It  is  confidently  predicted 
that  the  withdrawal  of  these  circuitous  routings  for  transcontinental  business  is  bound 
to  take  place,  if  the  railroads  are  to  continue  to  share  in  transcontinental  business, 
susceptible  of  shipment  by  sea. 

Traffic  conditions  throughout  the  Southwestern-Gulf  region  are  fairly  uniform. 
Naturally  there  are  no  manufactures,  and  the  carriage  outward  consists  of  the  products 
of  the  territory.  Inbound,  there  L?,  of  course,  the  lesser  volume  of  manufactures  and 
supplies  which  are  consumed  by  the  population.  But  the  principal  earnings  of  all 
these  roads  arise  from  the  carriage  of  grain,  shading  off  into  the  carriage  of  cotton  and 
lumber  Irom  the  southern  and  southeastern  portions,  the  carriage  of  petroleum  in 
large  volume  from  the  recently  developed  oil  fields,  and  the  handling  of  coal  in  con- 
siderable volume  from  the  measures  which  quite  generally  underlie  a  part  of  the 
region.  These  different  clashes  of  traffic  fluctuate  in  proportion  from  year  to  year. 
Particularly  is  this  the  case  with  gitiin,  which  is  very  intermittent,  as  determined  by 
conditions  in  the  drier  half  of  the  territory,  and  reliance  upon  the  grain  is  ako  rendered 

63  I.  C.  C. 


616 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION   OF   RAILROADS. 


617 


H 


if 


'       T 

I: 


uncertain  by  reason  of  the  steady  decline  in  the  productivity  of  the  soil.  Whereas  the 
yield  in  Kansas  as  virgin  territory  is  said  once  to  have  been  35  or  more  bushels  of  wheat 
to  the  acre,  the  average  has  now  fallen  to  perhaps  11-13  bushels.  The  cutting  of 
timber  has  been  going  on  apace,  and  this  also  represents  an  exhaustion  of  resources. 
These  circumstances  still  further  emphasize  the  need  of  conserving  the  transportation 
facilities,  by  resisting  the  temptation  to  separate  the  through  from  the  local  lines. 
Only  by  holding  them  all  together,  abandoning  where  absolutely  necessary  lines  which 
may  be  dispensed  T\ith,  can  a  constructive  policy  be  pursued  to  the  end.  Again, 
one  is  driven  to  the  conclusion  that  a  general  rearrangement  of  these  roads,  s^regating 
them  into  two  competing  systems  in  order  to  conform  to  the  requirements  of  the  act, 
is  the  proper  course  to  pursue.  One  therefore  rejects  suggestions  which  have  been 
pressed  by  competent  authority  for  the  creation  of  three  rather  than  two  competitive 
systems  within  this  Southwestern-Gulf  territory.  The  objection  to  this  course  is  not 
only  that  it  brings  about  forced  and  abnormal  relationships  but  that  it  necessarily 
sets  off  the  through  stems  from  the  weaker  branches  and  feeders.  It  also  leaves  the 
pystems  too  small  comparatively  as  conaistent  units  in  the  great  national  system  which 
is  proposed  by  this  plan. 

A  marked  characteristic  of  the  Southwestern-Gulf  territory  is  the  very  large  amount 
of  mileage  which  still  remains  in  independent  hands.  The  number  of  local  properties, 
varying  in  length  from  100  to  300  miles,  is  very  considerable.  Some  of  these,  like  the 
Louisiana  Railway  &  Navigation  Company,  follow  the  river  courses,  and  are  obviously 
destined  to  form  main  stems  to  strategic  points.  But  many  others,  like  the  Midland 
Valley,  the  Fort  Smith  &  Western,  the  Louisiana  &  Arkansas,  etc.,  out  in  the  open 
country,  have  a  very  uncertain  future  so  far  as  relationship  to  the  great  systems  is 
concerned.  Most  of  these  roads  are  in  a  precarious  condition,  hanging  on  the  verge 
of  receivership,  into  which  some  of  them  have  plunged  again  and  again.  To  recom- 
mend positively  their  inclusion  in  one  or  another  of  the  two  great  systems  proposed 
of  course  operates  automatically  to  close  their  open  market  for  trading  in  case  of  sale. 
Furthermore,  it  imposes  a  definite  direction  upon  the  movement  of  their  business; 
and  as  yet,  with  the  country  only  partly  developed,  such  merger  ought  to  he  the 
result  of  slow  conviction  based  upon  demonstrated  natural  relationships  through  the 
years  to  come.  For  most  of  these  smaller  properties,  however,  an  endeavor  has  been 
made  to  place  them  in  their  best  present  relationship  to  the  proposed  systems  so  far 
as  one  can  ascertain  it.  But  these  recommendations  are  made  only  tentatively,  in 
the  expectation  that  the  course  of  events  during  the  next  25  years  may  induce  the 
Commission,  as  it  is  permitted  to  do  under  the  statute,  to  revise  its  conclusions  in  this 
regard.  But  the  systems  for  this  entire  region  are  constituted  under  this  plan  with 
this  reservation,  merely  so  as  to  take  up  and  place  definitely  most  of  these  properties 
in  their  relation  to  the  larger  whole.  Only  thus,  it  is  submitted,  may  the  significance 
and  feasibility  of  the  consolidation  plan  be  envisaged  in  a  large  way.  If,  as  these 
smaller  roads  more  definitely  "find  themselves,"  it  be  discovered  that  other  relation- 
ships than  these  are  more  natural,  there  is  always  opportunity  for  an  application  for 
revision  of  this  plan. 

Another  general  feature  of  the  Southwestern-Gulf  r^on  is  that  there  are  too  many 
railroads  to  be  supported  by  the  available  traffic.  This  is  partly  due  to  the  well- 
known  activities  of  the  railway  promoter,  who  has  found  in  this  territory  the  last, 
and  a  most  inviting,  field  for  the  practice  of  his  art.  There  are  more  railways  in  fact 
than  the  country  can  probably  support  for  many  years  ahead.  This  condition  is  more 
true  in  this  region  than  anywhere  else  in  the  United  States,  and  it  is  a  considerable 
source  of  embarrassment.  One  hesitates  to  recommend  the  downright  abandonment 
of  a  railroad  line  once  constructed.  Property  values  have  been  conditioned  upon  its 
operation,  and  manifest  injustice  may  result  from  the  withdrawal  of  transportation. 

63 1. 0.  C. 


But  it  is  nevertheless  true  that  many  lines  have  been  laid  down  for  which  there  was 
never  originally  a  long-time  justification.  Useless  duplication  of  facilities  has  ren- 
dered both  properties  unremunerative.  Such  matters  have  been  brought  to  a  head 
in  connection  with  the  repeated  bankruptcies  and  reorganizations  which  have  char- 
acterized the  lives  of  many  of  these  properties.  At  the  moment,  for  example,  the 
reorganization  committee  of  the  Missouri,  Kansas  &  Texas  is  abandoning  to  the  bond- 
holders as  hopeless  the  two  lines  of  the  Katy  (map  25),  from  Oklahoma  City  southeast 
to  Atoka  in  Oklahoma,  and  from  Greenville,  Tex.,  southeast  to  Shreveport,  La., 
re-'pe-'tively.  Another  line  which  after  protracted  bankruptcy  has  just  discontinued 
operation  is  the  Missouri  &  North  Arkansas  from  Joplin,  Mo.,  to  Helena,  Ark. 
This  road,  362  miles  in  length,  cuts  clear  across  the  state  of  Arkansas  to  Helena  on 
the  Mississippi  River,  as  shown  by  the  dotted  line  on  map  26.  Originally  a  logging 
road,  it  not  only  lies  almost  entirely  in  the  inhospitable  Ozark  region,  but  it  is  paral- 
leled on  either  side  by  the  lines  of  the  Missouri  Pacific.  It  is  alleged  that  there  is  not 
a  living  for  the  property  and  that  the  only  thing  to  do  is  to  tear  it  up.  It  is  evident 
from  the  map  that  the  road  neither  begins  nor  ends  anywhere,  and  it  is  difficult  to 
see  how  it  could  perform  any  useful  function  except  to  serve  the  towns  locally  along 
its  line.  Whether  they  can  afford  sufficient  business  to  keep  it  alive  is  open  to  ques- 
tion. The  case  is  cited  merely  to  illustrate  certain  local  conditions  in  the  South- 
western-Gulf territory  which  must  be  dealt  with  in  this  plan. 

As  affording  a  summary  view  of  the  financial  status  of  the  principal  Southwestern- 
(lulf  lines,  the  accompanjing  table,  showing  data  for  1917,  is  pertinent.  It  merely 
assembles  the  principal  data  which  must  enter  into  any  conclusion  as  to  whether  the 
respective  roads  are  strong  or  weak. 


Carrier. 


Fort  Smith  &  Western 

I  nternational  &  Great  Northern 

Kansas  City  Southern 

Louisiana  Railway  &  Navigation  Co. 

Midland  Valley 

Missouri,  Kansas  &  Texas 

Missouri  Pacific 

New  Orleans ,  Texas  &  Mexico 

St .  Louis-San  Francisco 

St.  Louis,  San  Francisco  &  Texas . . . 

St.  Louis  Southwestern 

St.  Louis-Southwestern  of  Texas 

Texas&  Pacific 


Investment 
in  road  and 
equipment 
per  mile  of 
line. 

Railway 

operating 

revenue  per 

mile  of  line. 

$59,461 

14,651 

37,153 

10,856 

203,710 

16,025 

63,248 

7,087 

51,848 

7,629 

102,499 

14,900 

51,216 

10,598 

87,948 

7,936 

73,528 

12,074 

32,497 

6,170 

99,423 

12,161 

39,057 

7,206 

60,965 

11,669 

Net  operat- 
ing income 
per  mile  of 
line. 


Percentage 
I  net  operat- 
ing income 
to  invest- 
ment. 


d«sr. 


1317 
1,203 
4,153 
1,014 
1,151 
3,355 
1,895 
1,144 
2,877 
1,846 
3,558 
684 
2,110 


def. 


0.67 
3.39 
3.95 
L69 
2.36 
3.43 
3.96 
1.44 
3.93 
12.01 
4.70 
1.14 
3.64 


A  peculiarity  of  the  Southwestern-Gulf  situation,  which  introduces  an  element 
of  confusion  into  all  statistical  comparisons  is  the  separate  incorporation  and  accounting 
of  the  railway  lines  located  in  Texas.  This  is,  of  course,  the  result  of  the  strict  require  - 
ments  of  the  public-service  regulations  of  that  commonwealth,  particularly  of  that 
portion  known  as  the  stock  and  bond  law  of  1893,  which  was  directed  to  the  prevention 
of  overcapitalization.^  In  this  particular  regard  the  statute  has  perhaps  been  success- 
ful, but  an  indirect  effect,  certainly,  has  been  to  penalize  improvement  and  better- 
ment by  existing  companies.  New  capital,  where  imperatively  needed  by  large 
systems  having  branches  in  Texas,  has  necessarily  been  raised  through  the  issue  of  their 
own  collateral  trust  securities,  based  upon  the  deposit  of  Texas-line  bonds.  Con- 
comitantly this  financial  segregation  has  left  a  considerable  number  of  these  supple- 
mentary Texas  lines  in  very  bad  case  financially.    The  following  table  showing 

1  Cf.  analysis  in  Ripley's  "Railroads:  Finance  and  Organization,"  pp.  301-6. 
63  I.  C.  C. 


ll 


1    ^ 

1^ 


618  INTERSTATE   COMMERCE   COMMISSION   REPORTS. 

l)ercentage  of  net  operating  income  to  investment  in  road  and  equipment    1917 
illustrates  the  point:  '  ' 

Percent- 
Kansas  City  Southern *"®', 

Texarkana<fe  Fort  Smith  (Kans/cy/so!)(Texiw'lin'es)'.'..'.' I'll 

yiis-yii'i,  Kai^as&Te^a? 

Missouri,  Kansas  &  Texas  of  Texas  (Texas  lines)....*..'.  *. t  i n 

St.  Louis-San  Francisco [ 

St.  Louis,  San  Francisco  ct  Texas  (Texas  lines). V^"  .«  ?? 

St.  Louis  Southwestern V.V.V.'.V.V.V '. 

St.  Louis  Southwestern  of  Texas  (Texas  lines) f*?? 

It  is  eWdent  from  this  showing  that,  with  the  exception  of  the  Texas  lines  of  the 
Kansas  City  Southern,  the  subsidiaries  in  Texas  are  all  notablv  weak.  Whether  this 
18  wholly  due  to  the  local  traffic  conditions,  or  arises  in  part  from  prorating  and  account- 
ing methods.  It  18  difficult  to  determine.  In  either  case,  a  general  problem  is  presented 
of  accommodation  of  the  regulatory  program  of  the  individual  states  to  that  of  the 
federal  government.  And,  as  elsewhere  discussed  in  the  introduction,  such  condi- 
tions  may  well  form  part  of  the  problem  of  federal  incorporation,  which  is  necessarilv 
involved  m  the  matter  of  consolidation.  Its  many  details  remain  to  be  worked  out 
m  future. 

But  the  (iulf-Southwestem  roads  as  a  whole  are  not  merely  a  set  of  local  carriers 
While  not  naturally  large  factors  in  transcontinental  business,  thev  are  properly 
called  upon  to  perform  an  important  function  for  the  nation  as  a  whole  through  en^- 
ing  in  long-haul  business  to  and  from  the  Gulf  ports  to  the  Missouri  River  gatewavs 
They  are  necessary-  outlets  for  the  entire  country  west  of  the  Mississippi  River      Vnd 
the  construction  of  the  Panama  Canal  and  our  recently  developed  mercantile  marine 
interests  are  bound  to  emphasize  still  further  the  import  and  export  feature  of  the 
Southwestern-Gulf  traffic.    These  roads  differ  considerably,  as  thev  have  been  oper- 
ated  independently  in  the  past,  in  their  ability  to  participate  in  thi's  business.    Some 
of  them,  like  the  Kansas  Citv  Southern  (map  26),  a  bee  line  between  Kansas  Citv  and 
the  Gulf,  have  been  favored  connections  for  many  years  with  the  great  systems  oper- 
ating  north  of  Kansas  City. 

Others,  like  the  Frisco  and  the  Katy.  have  suffered  from  lack  of  through  connection 
to  the  Gulf,  or  else  because  the  trend  of  their  constniction  indicated  rather  a  purpose 
to  serve  St.  Louis  and  Kansas  City  as  bases  rather  than  the  ports  of  Galveston  and  New 
Orleans.     Senous  consideration  has  I)een  given  in  this  report  to  the  possibility  of 
utilizing  certain  of  these  direct  north-and-south  lines  in  this  Gulf  territorv  as  parts 
of  the  great  transcontinental  systems  north  of  the  Missouri  River  gateways     Either 
the  Buriington-Xorthem  Pacific  or  the  Union  Pacific  system  could  well  use  the  Kan- 
sas City  Southern,  for  example,  as  an  outlet  to  the  Gulf,  to  match  the  almost  inc  om- 
parable  Illinois  Central  line  to  New  Orieans.     But  a  serious  objection  to  withdrawing 
such  air  lines  from  this  group  is  the  financial  condition  of  all  the  carriers  in  the  re-ion" 
Most  of  them  have  been  in  bad  case  throughout  the  past,  frequent  bankruptcy  and 
reorganization  succeeding  one  another.    And  it  is  well  known  that  the  long-haul 
through  business  affords  the  lucrative  traffic,  while  the  gathering  lines,  branches  and 
feeders,  essential  to  the  local  development  of  the  territory,  can  not  stand  on  their  own 
feet  by  themselves.    To  withdraw  for  incorporation  in  the  powerful  northern  svstems 
certain  of  the  best  lines  in  this  territory,  thus  leaving  only  the  widely  ramifyin-  local 
on^   would  render  their  financial  condition  even  more  precarious  than  at  pr'e^ent 
It  18  believed  that  the  wisest  policy  is  to  take  all  of  the  roads  within  this  territorv  and 
8o  d^^^de  them  up  into  two  competitive  groups  as  to  produce  a  fairly  balancedVom- 
petition  between  the  two.    They  should  each  reach,  as  far  as  possible,  the  same 
common  points.    They  should  each  have  a  fair  opportunity  to  share  in  the  lucrative 

63  I.  C.  C. 


CONSOLIDATION   OF   RAILROADS. 


619 


long-haul  traffic,  and  each  should  contribute  its  part  toward  the  support  of  the  local 
branches  and  feeders. 

The  reasoning  just  outlined  accounts  in  part  for  the  rejection  of  an  alternative 
offered  by  highly  competent  authority  for  the  general  treatment  of  this  region.  It  has 
been  urged  that  these  roads  should  be  apportioned  in  part  to  the  two  great  southern 
transcontinental  systems,  the  Santa  Fe  and  the  Rock  Island-Southern  Pacific,  taking 
each  of  them,  for  example,  into  New  Orleans;  and  matching  the  Rock  Island  likewise, 
l)y  proper  additions  to  the  Santa  Fe,  with  a  line  across  Arkansas.  Then,  having  thus 
enlarged  these  transcontinental  systems  which  already  tap  this  territory  and  draw 
upon  it.  particularly  for  lumber,  it  is  suggested  that  the  remaining  local  lines  should 
then  be  consolidated  into  a  single  Southwestern-Gulf  system  instead  of  two.  But  the 
geography  of  the  region,  as  well  as  the  general  layout  considered  for  the  country  as  a 
whole  render  this  impracticable,  it  is  believed.  The  situation  is  analogous  in  many 
ways  to  the  proposal  discussed  in  chapter  I  for  merging  the  Erie  and  the  Nickel  Plate- 
Lackawanna  roads,  instead  of  using  the  backbone  of  each  to  constitute  two  competitive 
systems.  In  each  case  the  attempt  involves  forced  relationships  and  duplication  of 
facilities,  where  there  ought  to  be  competition.  Thus  for  example,  the  two  great 
widespread  systems  in  this  Gulf  region  are  the  Frisco  (map  25)  and  the  Missouri 
Pacific  (map  26).  These  pretty  well  match  one  another  in  general  scope  throughout 
a  considerable  territory.  Neither  one  could  be  incorporated  in  the  transcontinental 
systems  above  mentioned;  and  to  put  them  together  in  a  single  Gulf  group  would 
involve  much  duplication  and  would  merge  two  long-standing  competitors.  Thus 
one  is  forced  again  to  the  conclusion  that  each  of  these  two  larger  Gulf  railroads 
should  be  made  the  nucleus  of  a  comprehensive  system,  matching  one  against  the 
other  at  as  many  common  points  as  possible,  and  coupling  this  procedure  with  the 
requisite,  already  mentioned,  that  the  through  lines  and  the  local  lines  must  be  put 
together  in  such  a  way  that  as  well  balanced  financial  strength  shall  result,  as  the 
resources  of  the  region  permit. 

Having  adopted  the  foregoing  general  program  for  the  Southwestern-Gulf  systems, 
it  is  next  in  order  to  decide  whether  or  not  these  systems,  resident  southwest  of  Kansas 
City  and  St.  Louis,  had  best  stop  short  at  those  strategic  points  or  be  extended  into 
Chicago.  In  other  words,  will  these  roads  be  better  fitted  to  play  their  part  in  national 
development  and  to  serve  their  local  constituencies,  if  they  have  their  own  rails  into 
Chicago,  by  incorporation  of  intervening  independent  properties,  rather  than  to  de- 
pend upon  connections  which  necessarily  under  a  consolidation  plan  form  part  of  ' 
other  great  systems?  The  situation,  general  consolidation  being  once  in  effect,  would 
be  notably  different  from  that  which  obtains  at  present.  One  must  become  accus- 
tomed to  thinking  in  terms  of  consolidation  and  not,  as  heretofore,  in  terms  of  pro- 
miscuous competition.  The  question  herewith  presented  has  already  been  faced 
in  chapter  IV  in  connection  with  the  southeastern  roads.  The  decision  for  them  was 
to  the  effect  that  the  wiser  policy  would  be  to  restrict  their  activities  to  the  territory 
lying  south  of  the  Ohio  River.  It  is  pertinent  therefore  at  the  outset  to  compare  the 
southeastern  and  the  southwestern  situations,  as  respects  Chicago.  If  the  conditions 
in  both  regions  are  similar,  the  decision  reached  for  the  southeast  becomes  naturally 
applicable  to  the  southwest.  Contrariwise,  to  discern  a  difference  of  circumstances, 
might  commend  a  distinct  policy  in  this  regard.  In  each  case  the  connection  into 
Chicago  is  necessarily  made  through  trunk  line  territory.  This  eliminates  the  west- 
em  roads,  and  reduces  the  problem  to  an  analysis  of  the  traffic  relations  between  both 
southern  groups  of  roads  and  the  trunk  lines,  viewing  each  group  in  the  light  of  the 
physical  and  commercial  geography. 

The  first  difference  discoverable  is  that  the  southeastern  railroads — east,  that  is 
to  say,  of  the  Illinois  Central — are  not  competitors  with  the  trunk  lines,  as  are  the 

63  I.  C.  C. 


620 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION   OF   RAILROADS. 


621 


a 


competing  c^m^ei^    lo Ton^H  T  '      '^     *"  complementary  mther  than  t« 

i^txiig  earners,  to  connections  and  not  to  romn«»fif/^is,      t^  i. 

tieipatee  in  it  because  of  it.  direct  low-ZdelSe  buT  .h.^K  f  ^^""*'  ^'^ 

to  the  Atlantic  seaboard,  can  also  not  be  ignored.    The  lake  water  Zt^Z  Z^Z 

63 1.  C.  C. 


tionably  a  factor  which  enters  even  into  the  problem  of  the  Gulf  ports.  More  low- 
grade  traffic  certainly  tends  to  move  overseas  by  way  of  the  north  Atlantic  ports, 
rather  than  the  Gulf,  than  would  be  the  case  if  the  great  lakes  were  not  situated  as 
they  are.  This  feature  of  the  physical  geography  constitutes  an  underljing  difference 
between  the  railroad  geography  of  the  southeast  and  the  southwest. 

A  third  discoverable  difference  which  might  wanant  a  contrasted  policy  with  the 
southeast  arises  from  the  location  of  the  great  primary  market  of  St.  Louis.  Not  only 
St.  Louis  but  Kansas  City  also,  in  a  way,  are  primary  markets;  whereas  on  the  south- 
east neither  Louisville  nor  Evansville  may  be  said  to  jeopardize  the  supremacy  of 
Chicago.  But  Chicago  and  St.  Louis  particularly  are  keen  rivals  for  business,  and 
it  will  contribute  to  national  development  that  they  should  continue  to  be  so  through- 
out as  wide  a  territory  as  possible,  rather  than  that  private  domains  should  be  marked 
off  here  and  there  as  appurtenant  to  each  great  city.  Such  being  the  case,  it  will 
unquestionably  contribute  to  holding  the  Cliicago  market  on  a  parity  mth  those  of 
the  Missouri  River  cities  if  the  railroads  of  this  region  operate  their  own  trains  into 
Chicago  and  have  a  substantial  investment  to  support.  Tlirough  billing  and  quick 
delivery,  with  a  number  of  other  favoring  concomitants  would  be  much  more  likely 
to  prevail  than  if  Chicago  were  compelled  to  do  business  in  Oklahoma,  Kansas,  or 
Texas,  both  at  longer  range  and  without  distinct  railroad  friends  at  court. 

Nor  are  these  the  only  reasons  which  commend  extension  of  the  Southwestern-Gulf 
Systems  into  Chicago.  These  railroads  need  revenue,  to  be  had  from  the  long  haul, 
as  already  described  in  another  connection.  They  should  not  be  condemned  solely 
to  perform  the  local  and  expensive  function  of  operating  networks  of  branches  and 
feeders.  Their  somewhat  precarious  financial  condition  contrasts  mightily  with  the 
prosperity  of  the  Southern  Railway  and  the  I^uisville  &  Nashville;  and  out  of  this 
need  there  arises  again  the  justification  for  a  share  in  the  through  Chicago  traflic. 
The  topic  may  be  dismissed  with  one  final  argument.  There  are  a  certain  number  o^ 
properties  which  for  many  years  have  confined  their  activities  to  the  field  between 
Chicago  and  the  Missouri  River  gateways.  The  difficult  status  of  these  roads  under 
a  general  consolidation  plan  has  been  already  set  forth  in  connection  with  the  trunk 
lines.  Not  to  use  the  Chicago  &  Alton,  for  example,  as  the  stem  of  a  southwestern 
trunk  line,  under  a  general  consolidation  plan,  would  condemn  it  to  play  the  role  of 
a  local  subsidiary  within  a  trunk  line  system,  with  which  inherently,  because  of 
the  traffic  conditions  above  described,  it  could  not  be  expected  to  have  much  in 
common.  And  the  same  thing  is  in  a  measure  true  of  the  through  lines  of  the  Chicago  & 
Eastern  Illinois,  as  distinct  from  the  eastern  division  which  serves  its  coal  territory. 
The  natural,  albeit  the  almost  inevitable,  allocation  of  these  two  roads  is  to  the 
Southw^tern-Gulf  systems. 

The  conclusion  based  upon  the  foregoing  reasons,  then,  is  that  the  two  southwestern 
systems  should  include  stems  into  Chicago,  comprehended  by  consolidation  within 
their  own  groups.  In  due  time  the  next  step  will  be  taken  of  deciding  as  to  the  par- 
ticular railroads  best  fitted  for  this  purpose. 

The  St.  Louis-^an  Francisco  Railway  system,  operating  in  1919,  5,252  miles  of  first 
main  track,  ramifies  throughout  the  southwest,  as  shown  by  map  25.  The  strongest 
portion  of  it  is  the  old  Kansas  City,  Fort  Scott  &  Memphis  line,  which  passes  by  way 
of  Fort  Scott,  Kans.,  and  Springfield,  Mo.,  from  the  Missouri  River  gateway  down 
toward  the  southeast.  Over  this  line  passes  the  great  volume  of  packing-house 
products  and  of  grain,  to  feed  the  population  of  the  cotton-raising  south;  and  back 
over  it  a  great  volume  of  coal  and  iron  and  steel  products  is  hauled  from  the  Bir- 
mingham district  in  Alabama.    Both  of  these  classes  of  traffic  afford  all-the-year- 

63 1.  C.  C. 


/ 


/ 


M 


622 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


round  business.    So  that  this  division  is  the  strongest  part  of  the  system,  although 
it  is  operated  over  the  Ozarks,  rising  east  of  Springfield  to  an  altitude  of  1,625  feet 
above  the  sea.    It  is  also  somevrhat  roundabout,  sweeping  quite  far  to  the  south  by- 
way of  Fort  Scott.    It  should  be  noted  in  this  connection  that  the  direct  line,  shown 
on  the  map  from  Kansas  City  to  Springfield,  Mo.,  is  merely  of  local  importance  and 
contributes  Uttle  strength  to  the  gross  earnings.    A  weakness  of  the  Frisco  system 
18  the  fact  that  its  other  main  stem,  which  nms  southwesterly  from  St.  Louis  (map 
25)  through  Springfield  and  so  on  into  Oklahoma,  rises  at  times  by  quite  heavy  grades 
to  a  height  of  almost  1,400  feet  in  crossing  the  Ozarks  in  central  Missouri.''  This 
constitutes  an  operating  disabiUty  as  against  the  lines  running  up  the  Missouri  River 
Valley  either  to  Kansas  City,  or  which,  like  the  Katy  (map  25  again),  skirt  the  Ozarks 
and  slip  down  across  the  comer  of  Kansas  into  Oklahoma  by  much  easier  grades. 
But  the  Frisco  is  peculiarly  strong  in  the  rich  alluvial  bottom  lands  of  southeastern 
Missouri  and  northeastern  Arkansas.    Here,  as  the  map  shows,  a  considerable  net- 
work of  feeders  pro\'ides  a  lucrative  and  very  rapidly  increasing  business.    On  the 
other  hand,  the  system  has  a  number  of  arms  or  extensions  into  middle  Kansas, 
western  Oklahoma,  or  central  Texas,  which  can  not  contribute  to  the  company  budget 
proportionately  to  their  operating  costs.    These  branches  are  necessary  for  the  coun- 
try;  but,  as  elsewhere  stated,  they  must  be  carried  rather  as  liabilities  through  the 
strength  of  the  real  assets,  which  are  the  main  Unes. 

The  financial  status  of  the  Frisco,  according  to  the  several  statistical  exhibits,  is 
in  general  only  fair.     Its  railway  operating  revenue  per  mile  of  line  for  1917  (type 
year)  was  112,074,  yielding  a  net  operating  income  of  $2,878.    The  gross  revenue 
about  equaled  that  of  the  St.  Louis  Southwestern  and  was  substantially  higher  than 
the  Missouri  Pacific,  at  $10,598  per  mile  of  line.     It  was  appreciably  grelter  than 
even  the  Great  Northern,  with  a  railway  operating  revenue  per  mile  of  line  of  $10,670. 
The  railway  operating  revenue  of  the  Chicago  North  Western  per  mile  of  Une  was  only 
$12,996  in  1917.    Where  the  Frisco  suffers,  the  result  appearing  in  the  low  net  operat- 
ing income,  is  in  the  excessive  capital  account  per  mile  of  Une.    Investment  in  road 
and  equipment  per  nule  of  Une  in  1917  was  $73,528.    The  corresponding  figures 
for  the  Southern  Pacific  were  $69,664.    For  the  Chicago,  BurUngton  &  Quincyl;hey 
were  only  $52,164;  for  the  St.  Paul,  $60,233;  and  for  the  Rock  Island  only  $45,541. 
The  investment  account  of  the  Union  Pacific  in  1917  was  only  $76,153,  much  of  it 
being  main  Une  and  all  maintained  at  top-notch  efficiency.    The  excessive  invest- 
ment account,  added  to  the  operating  disabiUties,  together  pulled  down  thejnet 
operating  income  to  only  3.93  per  cent  of  the  investment  in  road  and  equipment. 
Obiiously  the  Frisco  should  not  be  weakened,  but  ought  rather  to  be  upbuilt  by 
the  elimination  of  its  weaker  units  and  the  incorporation  of  lines  which  add  earning 
power,  or  which  effect  the  completion  of  through  routes  or  long  hauls. 

The  operating  disabiUty  of  the  Frisco  main  Une  over  the  O^rks  has  been  already 
mentioned.  In  order  to  overcome  this  difficulty  for  freight  business,  the  main  route 
from  Kansas  City  south  is  the  line  on  map  25,  via  Tulsa,  Okla. ,  thence  south  to  Denison 
Tex.,  and  on  to  DaUas  and  Fort  Worth.  This  is  the  low-grade  main  stem.  But 
the  main  stem  for  passenger  business  Ues  farther  east,  through  Fort  Smith,  Ark.  This 
Une,  however,  is  incomplete  as  to  ownership  between  Paris  and  Dallas,' Tex.  This 
stretch  is  owned  by  the  Gulf,  Colorado  &  Santa  Fe— the  Texas  unit  of  the  Santa  Fe 
system.  But  as  such,  according  to  map  22,  it  is  merely  a  stub  end,  of  no  real  through 
use  to  the  Santa  Fe  system.  The  Frisco,  especially,  should  not  be  left  dependent 
upon  the  use  of  a  branch  Une  of  another  system.  Such  conditions  do  not  conduce 
either  to  improvement  or  safety  of  operation  for  parts  of  a  main  Une.    It  is  recom- 

63  I.  C.  C. 


CONSOLIDATION   OF   RAILROADS. 


623 


mended,  therefore,  that  this  branch  be  transferred  to  the  Frisco  system.  It  might 
^ell  be  exchanged  for  the  Fort  Worth  and  Rio  Grande  (map  25),  which  runs  from 
Fort  Worth  southwest,  as  dotted  on  the  map.  This  would  carry  the  transfer  also 
of  the  little  branch  known  as  the  Brownwood  North  and  South  line.  This  transfer 
of  the  Rio  Grande  division  would  not  shut  the  Frisco  out  of  the  Stephens  county 
oil  field,  as  it  Would  still  come  into  it  over  the  Une  northwest  out  of  Waco  (map  25), 
which  is  added  with  the  Katy  inclusion,  soon  to  be  described.  The  transfer  would 
put  this  Fort  Worth  &  Rio  Grande  into  a  system  tied  in  at  both  ends  of  the  line,  instead 
of  attached  at  one  end  as  at  present.  Possibly  its  deficit  of  0.01  per  cent  in  1917 
might  be  in  a  measure  overcome  by  reason  of  the  change. 

The  Kaasas  City,  CUnton  &  Springfield  Railway,  162  miles  long,  closely  parallels 
the  entire  local  division  of  the  Frisco  between  Kansas  City  and  Springfield  (dotted 
on  map  25).  It  looks  Uke  another  one  of  those  little  properties  in  this  territory  which 
contributes  nothing  except  local  service  to  the  community.  Reaching  neither  city 
i;vhich  begins  or  ends  its  name,  it  begins  nowhere  and  Ukewise  ends.  It  is  difficult 
to  see  where  it  would  add  anything  to  the  Missouri  Pacific  system — certainly  nothing 
either  to  the  Santa  Fe  or  the  Rock  Island.  And  from  end  to  end,  as  above  stated, 
it  parallels  the  Frisco  almost  like  a  second  track.  Its  ownership  is  said  to  reside  in 
hands  friendly  to  the  Frisco,  "although  not  ostentatiously."  The  case  is  submitted 
for  consideration  as  to  abandonment,  unless  the  road  can  indeed  be  carried  along 
purely  as  a  local  enterprise  through  the  support  and  interest  of  the  towns  affected. 

Whether  or  not  to  divorce  the  Memphis-Birmingham  division  of  the  present  Frisco 
system  and  transfer  it  to  one  of  the  railway  systems  Ijdng  east  of  the  Mississippi  River, 
is  quite  fully  discussed  in  connection  with  the  Illinois  Central  in  chapter  IV  (page 
549).    On  tlie  whole  it  is  recommended  that  existing  conditions  be  not  disturbed. 

The  Mis?iouri,  Kansas  &  Texas  Railway,  as  at  present  constituted,  operated  in 
December.  1919,  3,863  miles  of  first  main  track.  The  location  of  this  mileage  is  shown 
on  map  25.  The  lines  owned  ramify  widely  through  the  territory-  directly  south  of 
Kansas  City,  trending  southwesterly  across  Kansas.  Oklahoma,  and  Texas.  There  are 
two  northern  extremities,  one  at  the  Hannibal  crossing  over  the  Mississippi  River  and 
the  other  entering  St.  Louis  by  a  line  paralleling  the  Missouri  River  closely  from  New 
Franklin  east  (map  25).  This  river  line  into  St.  Louis  enjoys  better  grades,  it  is 
reported,  than  the  main  stem  of  the  Missouri  Pacific.  The  Katy  has  had  a  troubled 
and  precarious  existence  financially  and  is  just  now  undergoing  reorganization.  Con- 
sideration of  the  table  on  page  617  shows  that  it  has  an  absurdly  high  investment 
account  per  mile  of  line,  mainly,  $102,499.  This  is  practically  double  the  correspond- 
ing figure  for  the  Chicago,  Burlington  &  Quincy.  The  investment  per  mile  of  line  for 
the  Rock  Island  is  only  $45,541.  With  the  large  proportion  of  unproductive  branches 
in  very  sparsely  settled  coimtry,  it  is  little  wonder  that  the  percentage  of  net  operating 
income  to  investment  for  1917  was  only  3.43  per  cent.  Until  drastically  reorganized, 
with  elimination  of  the  unproductive  units,  the  Katy  is  little  suited  to  add  financial 
strength  to  any  system.  But,  nevertheless,  the  southern  portion  of  its  system  especially 
supplements  and  reenforces  the  Frisco  lines  north  of  Texas.  On  the  whole,  it  is  the 
judgment  of  those  best  qualified  to  decide,  that  the  Katy  should  be  merged  with  the 
Frisco  system  rather  than  with  the  Missouri  Pacific.  As  an  instance  of  the  close 
•operating  relationships,  the  through  joint  passenger  service  at  present  from  St.  Louis 
to  San  Antonio,  Tex.,  known  as  the  "  Texas  Special,"  runs  over  the  Frisco  to  Vinita, 
Okla.,  thence  over  the  Katy  to  Denison,  Tex.,  then  back  on  the  Frisco  to  Dallas,  and 
on  again  to  San  Antonio  over  the  Katy.  In  other  words,  the  Texas  short  line  from  St. 
louis  is  best  constituted  of  alternative  stretches  of  road  taken  from  the  main  lines  of 
these  two  existing  corporations. 

63 1.  C.  C. 


/ 


624 


INTERSTATE   COMMERCE   COMMISSION    REPORTS. 


Theoretically,  were  one  free  to  apportion  roads  without  regard  to  existing  cor|)orate 
structure,  the  best  operating  allocation  could  be  made  by  dismemberment  of  the 
Katy,  utilizing  some  of  the  northern  parts  to  piece  out  deficiencies  in  the  Missouri 
Pacific  system,  but  reserving  the  main  line  across  Oklahoma  and  down  to  San  Antonio 
for  the  backbone  of  an  amplified  Frisco  system.    The  Frisco  now  ramifies  extensively 
throughout  northern  and  western  Oklahoma  and  northern  Texas,  everywhere  in  the 
keenest  competition  with  the  Katy.    If,  as  elsewhere  recommended,  the  St.  Louis 
Southwestern  is  in  part  to  be  merged  with  the  Frisco  in  order  to  amplifv  its  com- 
petitive  power  in  I^uisiana  and  east  Texas,  then  it  would  seem  to  be  fair  that  the 
northern  part  of  the  Katy  s\^tem  should  go  to  the  Missouri  Pacific,  in  order  to  make  up 
for  its  relative  disability  in  that  region  as  against  the  Frisco,  there  already  so  strongh 
intrenched.    The  Kat>',  in  pursuance  of  such  a  plan,  would  be  dismembered  north 
and  south  of  Denison,  Tex.    But  Denison  is  the  very  heart  of  the  Katy  scheme  of 
operation.    And  such  rough  handling,  it  is  submitted,  should  be  avoided  wherever 
possible  under  this  consolidation  plan.     It  is  therefore  recommended  that  the  >ri8souri, 
Kansas  &  Texas  in  general  be  merged  with  the  Frisco,  subject,  perhaps,  to  negotiation 
with  the  Missouri  Pacific  concerning  some  of  the  minor  exchanges  above  suggested. 
Only  one  express  amputation  of  a  Katy  division  is  recommended  at  this  time.    Con- 
sideration of  map  25  demonstrates  that  the  line  (dotted  on  the  map)  from  Fort  Scott  to 
Oklahoma  City  is  superfluous  in  a  Frisco  combination.    It  would  merely  parallel  the 
line  through  Vinita.    At  present  the  ^fissouri  Pacific  has  no  lice  into  Oklahoma  City: 
and  the  transfer  of  this  division  of  the  Katy  would  remedy  this  defect  and  substantially 
balance  up  competitive  conditions  in  Oklahoma.    It  is  recommended  therefore  that 
the  line  from  Parsons,  Mo.,  into  Oklahoma  City,  with  the  branch  to  TiUsa  and  ^tuskogee 
(also  dotted  on  map  25)  be  so  shifted.     The  Katy  line  from  Oklahoma  City  southeast  to 
Atoka  (also  dotted  on  map  25)  and  the  Katy  line  from  Green\'ille,  Tex.,  east  to  Shreve- 
port  are,  i  t  is  understood,  to  be  left  out  of  the  pending  Katy  reorganization.     Consid- 
eration of  maps  25  and  26  indicates,  however,  that  the  Atoka  line  derives  a  new  useful- 
ness in  this  more  comprehensive  plan.     It  provides  a  short  cut  between  the  Frisco 
Red  River  division  and  the  lines  west  of  Oklahoma  City,  as  against  the  long  line  \aa 
Sapulpa.    The  growing  tendency  to  use  the  Gulf  ports,  in  connection  with  water  haul 
to  and  from  north  Atlantic  ports,  makes  this  cut-off  desirable.    As  to  the  line  from 
Greenville  to  Shreveport,  it  does  not  supplement  this  amplified  Frisco  system,  as  the 
Cotton  Belt  between  Texas  and  ^temphis  already  furnishes  a  direct  line. 

The  St.  Louis  Southwestern  Railway,  otherwise  known  as  the  Cotton  Belt  (shown 
on  naap  25)  is,  as  has  been  already  stated,  to  be  utilized  under  this  plan  to  provide  a 
Frisco  competitive  service  across  Arkansas,  to  match  the  old  Iron  Mountain  route. 
Assuredly  it  could  not  go  into  a  Miiisouri  Pacific  combination,  as  in  that  event  all  com- 
petition in  the  Mississippi  Valley  throughout  Arkansas  would  disappear,  except  for 
the  Choctaw  line  of  the  Rock  Island  into  Memphis.  The  St.  Ixjuis  Southwestern  is 
the  strongest  financially  of  all  these  southwestern  properties.  As  the  table  on  page  617 
shows,  its  capital  account  is  high.  $99,423  per  mile  of  line.  Its  railway  operating 
revenue  per  mile  of  line  in  1917  was  $12. 161 ,  yielding  a  net  operating  income  per  mile  of 
line  of  13,558.  Even  on  the  very  high  investment  account  therefore  this  Welded  a 
return  on  investment  of  4.70  per  cent.  The  record  since  return  to  private  control  has 
been  favorable.  The  Cotton  Belt  is  one  of  the  two  or  three  roads  which  rejected  the 
government  guaranty  to  good  effect.  Its  net  income  for  the  six  months  to  September 
1,  1920,  exceeded  the  standard  return  for  the  period  by  $306,000  after  liberal  expendi- 
tures upon  maintenance. 

Assignment  of  the  St.  Louis  Southwestern  to  the  Frisco  system  without  reservation 
would  result  in  entirely  unnecessary  duplication  of  lines  up  the  Mississippi  Valley  be- 
tween Memphis  and  St.  Louis.    Coincidently,  as  elsewhere  set  forth  in  chapter  V,  the 

63 1.  C.  C. 


CONSOLIDATION  OF  RAILBOADS. 


625 


Rock  Island-Southern  Pacific  system  is  greatly  in  need  of  a  line  to  tie  in  the  Memphis 
division  (map  23)  with  St.  Louis  and  Chicago.  Expert  opinion  on  both  sides  supports 
the  recommendation  that  useless  duplication  to  the  Frisco  be  avoided,  while,  at  one 
and  the  same  time,  the  Rock  Island  can  be  pro\dded  with  a  necessary  line,  by  division 
of  the  St.  Louis  Southwestern  at  Brinkley,  Ark.  This  is  the  jimction  of  the  Rock 
Island  line  to  Memphis  with  the  Cotton  Belt  stem.  It  is  recommended  that  the  lines 
north  of  Brinkley  (as  dotted  on  map  25)  go  to  the  Rock  Island  system.  They  are  so 
added  on  map  23.  This  alters  the  Cotton  Belt  line  into  St.  Louis,  which  thereafter 
will  be  from  Brinkley  by  Rock  Island  trackage  to  West  Memphis  and  thence  up  the 
low-grade  river  line  of  the  Frisco  into  St.  Louis.  The  taking  over  by  the  Rock  Island 
of  the  Cotton  Belt  line  north  of  Brinkley,  operates  merely  to  substitute  the  Rock 
Island  for  the  Cotton  Belt  in  respect  to  trackage  relations  with  the  Missouri  Pacific. 
At  present  the  Missouri  Pacific  takes  trackage  over  the  Cotton  Belt  between  lUmo  at 
the  Thebes  bridgehead,  south  to  Paragould,  where  contact  with  Missouri  Pacific  rails 
is  again  established.  In  exchange  therefor  the  Missouri  Pacific  at  present  gives 
trackage  north  of  the  Thebes  bridge  up  the  east  bank  of  the  Mississippi  River  into  St. 
lx)uis  to  the  Cotton  Belt.  This  reciprocal  trackage  arrangement  under  this  plan  will 
continue  between  the  Missouri  Pacific  and  the  Rock  Island 

A  prime  requisite  for  an  effective  Southwestern-Gulf  system  is  the  provision  of 
through  routes  to  the  sea;  and  these  ought  to  be  afforded  both  to  New  Orleans  and 
Galveston.  This  is  something  which  the  Frisco  has  always  lacked  in  competition 
with  the  Missoiuri  Pacific,  which  has  enjoyed  access  both  to  New  Orleans  and  Gal- 
veston over  other  affiliated  Gould  lines.  The  provision  of  through  routes  to  the 
Gulf  therefore  is  fundamental.  As  to  New  Orleans,  a  route  is  afforded,  as  shown 
on  map  25,  by  the  inclusion  of  the  Louisiana  Railway  &  Navigation  Company,  from 
Shreveport  to  New  Orleans,  closely  paralleling  the  Red  River  all  the  way.  Unfor- 
tunately this  line  can  not  add  strength  financially,  according  to  the  data  for  the  type 
3'ear  1917.  Its  investment  account  is  very  heavy,  $63,248  per  mile  of  line.  Its  rail- 
way operating  revenue  was  $7,087  per  mile  of  line,  yielding  net  operating  income 
of  only  $1,014.  This  is  a  rate  of  return  on  investment  of  only  1.69  per  cent.  Evi- 
dently this  Edenborn  line,  so-called,  must  be  supported  by  through  traflic  from 
a  large  system.  It  is  so  plainly  marked  to  match  against  the  Texas  &  Pacific  from 
Shreveport  down  the  other  bank  of  the  river  (map  26)  in  the  Missouri  Pacific  com- 
bination, that  it  finds  a  natural  and  valuable  place  in  the  Frisco  group.  Of  course 
in  due  time  its  disability  of  freight  transfer  by  ferry  service  instead  of  a  bridge,  will 
disappear.    Until  then  it  operates  under  a  heavy  handicap. 

Consideration  of  map  25,  however,  shows  that  the  route  from  Kansas  City  to  New 
Orleans  provided  within  this  proposed  Frisco  system  will  still  be  quite  indirect  from 
Shreveport  north.  There  is  nothing  corresponding  for  directness  with  the  air  line 
of  the  Kansas  City  Southern,  north  of  that  city.  The  location  of  this  line  is  dotted 
on  map  25.  It  traverses  a  sparsely  settled  upland  territory  on  the  border  of  Oklahoma- 
Arkansas  west  of  Hot  Springs.  To  duplicate  this  line  with  the  present  volume  of 
traflSc  would  be  a  useless  expenditure.  But  possibly  trackage  might  be  given  which 
would  avoid  the  wide  detour  otherwise  necessary  to  the  west.  It  is  recommended 
therefore  that  trackage  be  provided,  first  over  the  Texas  &  Pacific  from  Shreveport 
to  Texarkana,  and  from  that  point  on  over  the  Kansas  City  Southern  to  Hartford 
Junction,  where  the  main  line  of  the  Frisco  is  once  more  reached.  This  double 
utilization  of  the  key  line  of  the  Kansas  City  Southern,  as  the  country  develops  and 
through  traflEic  increases,  may  conceivably  in  time  lead  to  the  building  of  a  parallel 
bridge  line  across  this  district,  or,  if  necessary,  to  the  double-tracking  of  the  road. 
But  in  the  meantime,  doubtless,  the  existing  rails  of  the  Kansas  City  Southern  can 
carry  all  the  business,  and  the  overhead  charges  can  be  shared  by  the  two  systems. 
Responsibility  for  upkeep  should  still  rest  with  the  enlarged  Missouri  Pacific  system, 
but  transportation  over  the  premises  might  well  be  allowed  to  the  Frisco. 

63 1. 0. 0. 


ffjl 


626 


nVTERSTATE   COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION^   OF   RAILROADS. 


627 


£'11. 


A  second  through  route  to  the  Gulf  must  reach  Galveston  as  well  as  New  Orleans. 
The  best  way  apparently  is  by  trackage  over  the  excellent  roadway  of  the  Trinity 
&  Brazos  Valley  (map  25).    This  is  an  air  Hne  from  Dallas  and  Fort  Worth  to  Gal- 
veston.   At  present  its  relationbhip  to  other  railroads  is  extremely  involved.    Origi-^ 
nally  it  was  a  joint  enterprise  of  the  Colorado  &  Southern  and  the  old  Rock  Island 
Company,  the  now  defunct  holding  corporation  which  headed  the  old  Reid-Moore 
enterprise.    The  Rock  Island  receiver  in  1915  disaffirmed  the  old  contracts  relative 
to  half-and-half  interest  in  the  Trinity  &  Brazos  Valley  with  the  Colorado  &  Southern. 
But  litigation  was  finally  avoided  by  an  agreement  decree.    At  present  the  Rock 
Island  Railway  is  the  owner  of  one-half  of  the  first-mortgage  bonds  and  of  the  capital 
stock.    The  Trinity  &  Brazos  Valley,  it  may  be  added,  controls  the  so-called  Gal- 
veston Terminal  Railway.    The  line  has  never  been  utilized  to  the  degree  which 
it  deserves.    It  ought  to  become  an  important  stem.    By  means  of  trackage,  to 
throw  business  from  the  great  network  of  lines  in  the  proposed  Frisco  system  to  the 
north  over  it  might  add  to  its  earning  capacity  and  overcome  the  very  heavy  deficit 
of  2.09  per  cent  of  net  operating  income  in  relation  to  investment.    There  is,  how- 
ever, another  possible  line  to  Galveston,  which  is  dotted  on  map  25.    Trackage  over 
the  Houston  East  &  West  Texas,  a  part  of  the  Southern  Pacific  system,  woukl  serve 
to  connect  the  southernmost  extremity  of  the  St.  Louis  Southwestern  at  Lufkin, 
Tex.,  with  Houston  and  thus  with  Galveston.    Apparently  the  rails  would  stand 
the  additional  traffic  without  prejudice  to  the  interest  of  the  Southern  Pacific.    But 
both  this  line  to  Galveston  and  the  Trinity  &  Brazos  Valley  are  not  apparently 
needed;  and  of  the  two,  the  Trinity  &  Brazos  Valley,  making  the  through  line  from 
Dallas  and  Fort  Worth,  seems  to  be  preferable. 

A  considerable  railroad,  which  must  be  taken  care  of  somehow,  is  the  Kansas  City, 
Mexico  &  Orient.    This  enterprise,  never  completed  through  to  the  Pacific  Ocean 
at  Topolobampo  in  Mexico,  remains  stranded  high  and  dry  as  a  local  line  from  Wichita 
southwest  across  the  arid  plains  of  Texas  almost  to  the  Mexican  border.    The  property 
had  an  investment  account  of  $39,723  per  mUe  of  line  in  1917,  on  which  it  earned 
only  0.03  per  cent.    The  road  as  a  whole  could  not  be  placed  effectively  in  either 
one  of  the  two  great  systems  proposed  for  this  region.    Its  line  from  Wichita  across 
Oklahoma  (map  26)  absolutely  parallels  an  existing  line  of  the  Frisco  (map  25  j.    And 
from  the  Red  River,  forming  the  northern  boundary  of  Texas,  on  to  Mexico,  the 
Orient  road  parallels  the  Texas  &  Pacific  (cf.  maps  25  and  26).    Thus  it  is  evident 
that  to  place  this  property  as  a  whole  in  either  one  of  these  combinations  would 
abolish  competition  and  create  superfluous  lines  within  the  same  system  for  either 
the  one  half  or  the  other  of  the  property.    But  to  split  it  up  north  and  south  of  Altus, 
Okla.,  as  shown  on  map  25,  permits  the  southern  half  across  Texas  to  be  added  to  the 
Frisco  system  where  it  has  no  line;  and  then  the  northern  half  above  Altus  may  be 
utilized  in  the  Missouri  Pacific  system  (map  26),  to  give  it  a  road  across  western  Okla- 
homa, without  which  it  would  have  no  representation  in  that  district.    Further- 
more, as  shown  by  map  26,  by  this  means  the  two  systems  are  much  more  evenly 
matched  against  one  another.    Each  is  .given  a  far-flung  line  clear  across  western 
Texas,  and  each  is  equally  represented  in  the  territory  of  western  Oklahoma.    And 
in  both  localities  competition  is  provided  by  means  of  practically  parallel  lines. 
This  proposal  to  subdivide  this  property,  it  may  be  added,  has  the  approval  of  sub- 
stantial expert  railroad  authority.    Unless  it  were  so  plain  a  case  calling  for  dis- 
memberment, the  recommendation  would  not  be  so  confidently  made. 

The  Frisco  system  as  compared  with  the  Missouri  Pacific  is  peculiarly  lacking 
in  mileage  in  northern  Louisiana.  There  is  a  little  line  known  as  the  Vicksburg, 
Shreveport  &  Pacific,  according  to  map  25,  which  runs  due  east  and  west  between 
Shreveport  and  Vicksburg.  It  is  controlled  by  the  Sterling  Trust,  Limited,  an 
English  holding  company,  which  also  owns  the  Alabama  &  Vicksburg  Railway  run- 

63 1.  G.  G. 


ning  straight  on  east  across  Mississippi  to  Meridian  (map  10).  This  line  east  of  the 
Mississippi  has  been  allocated  in  chapter  IV  to  the  Southern  Railway.  The  object 
in  cutting  the  road  asunder  at  the  Mississippi  River  is  to  allocate  the  railway  mileage 
to  the  different  rate  territories  for  governmental  administrative  purposes.  The  Vicks- 
burg, Shreveport  &  Pacific  Railway,  in  1917,  had  a  net  operating  income  of  3.67 
per  cent  upon  the  investment  in  road  and  equipment.  As  recently  reorganized  in 
1917,  it  appears  to  be  a  not  inordinately  weak  member  of  the  southwestern  group.  It 
is  recommended  that  it  be  added  to  the  Frisco  combination  as  a  part  of  this  general 
plan. 

The  best  railroad  for  affording  an  entry  into  Chicago  for  the  enlarged  Frisco  system, 
as  heretofore  described,  is  believed  to  be  the  Chicago  &  Alton  Railway.  Its  location 
in  relation  to  the  Frisco  is  depicted  on  map  25.  The  Alton  can  not  add  financial 
strength.  At  least  until  it  is  reorganized,  it  is  bound  to  be  unstable.  The  immense 
overload  of  bonded  indebtedness,  imposed  upon  it  years  ago  as  a  capitalization  of  its 
surplus,  has  rendered  it  a  continual  drain  upon  the  Union  Pacific  treasury.  But 
once  reorganized,  its  rails,  according  to  the  map,  afford  an  admirable  connection 
both  for  Kansas  City  and  St.  Louis  to  Cliicago.  In  the  Union  Pacific  system^  as  at 
present,  the  traffic  brought  by  that  system  into  Kansas  City  is  largely  local.  The 
Union  Pacific  delivery  of  cars  at  Kansas  City  to  the  Alton  amounted  to  only  5,359 
carloads  in  1917,  most  of  which  originated  on  the  system.  The  Alton  in  return  deliv- 
ered to  the  Union  Pacific  4,345  carloads,  about  one-half  of  which  were  destined  to 
points  on  the  Union  Pacific  system.  These  figures  demonstrate  that  the  Alton  is  of 
relatively  slight  value  in  its  present  connection.  Yet  this  road,  according  to  the 
map,  is  peculiarly  well  fitted  to  serve  the  Frisco  system.  For  it  not  only  gives  a 
short  line  from  St.  Louis  to  Chicago,  but  it  also  affords  a  better  line  to  the  Frisco,  as 
herein  amplified,  between  Kansas  City  and  St.  Louis  than  otherwise  would  obtain. 
Consideration  of  map  25  shows  that  the  existing  Frisco  system  has  no  direct  line  at 
all  between  Kansas  City  and  St.  Louis.  The  inclusion  of  the  Katy,  however,  gives 
it  such  a  route  but,  according  to  the  map,  it  is  composite  and  quite  roundabout. 
The  river  line  of  the  Katy,  in  fact,  from  New  Franklin  down  the  north  bank  of  the 
Missouri  to  St.  Charles  is  so  ill-suited  that  the  present  reorganization  committee  is 
considering  its  abandonment  to  the  bondholders,  and  they  also  find  so  little  value 
attached  to  the  Hannibal  line  that  that  also  is  scheduled  for  abandonment.  It  is 
recommended,  however,  in  view  of  the  proposed  merger  of  the  Katy  and  the  Alton 
that  the  Hannibal  division  be  included  at  least  as  far  as  Higbee,  Mo.,  the  junction 
of  the  Hannibal  division  with  the  Chicago  &  Alton.  There  is  quite  a  heavy  tonnage 
interchanged  at  this  point,  amounting  in  January,  1921,  to  a  delivery  by  the  Katy  of 
3^12  cars,  more  than  three  times  as  much  as  tlie  Katy  delivered  to  the  Alton  at  St. 
Louis,  As  for  the  Katy  line  from  Boonville  into  St.  Louis  along  the  north  bank  of 
the  Missouri  River,  under  the  cliffs,  it  is  recommended  that  it  be  transferred  to  the 
Missouri  Pacific  system.  As  a  low-grade  line,  in  the  opinion  of  the  Missouri  Pacific 
officials,  it  would  practically  give  them  a  double  track,  \nth  a  lower  grade  in  fact 
than  they  now  have  along  the  south  bank  of  the  river.  It  should  also  be  noted  in 
connection  with  the  Katy  line  from  Moberly  to  Hannibal  that  it  may  well  go  to  the 
Union  Pacific-North  Western  system  along  with  the  Wabash,  west  of  the  5kiississippi 
(see  map  15).    For  the  Wabash  already  uses  it  by  trackage  as  a  part  of  its  system. 

The  addition  of  the  Chicago  &  Alton  and  the  transfer  to  the  Missouri  Pacific  system 
of  the  Katy  line  down  the  north  bank,  as  hereinbefore  described,  would  still  leave 
the  Frisco  system  \\ith  admirable  short  routes  both  from  Elansas  City  into  St,  Louis 
and  up  to  Chi(iago  as  well.  The  Higbee  connection  will  also  be  advantageous  as 
affording  an  alternate  route  to  avoid  congestion  in  the  St.  Louis  terminal.  Further- 
more, the  Chicago  &  Alton  and  Frisco  terminals  at  Kansas  City  are  tributary,  admitting 
of  practical  consolidation.    And  then  at  Chicago  the  Frisco  would  get  a  good  terminal, 

63 1.  C.  G. 


628 


IJiTERSTATE   COMMERCE  COMMISSION  REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


629 


' 


I    ' 


including  the  modern  freight-house  layout  just  completed.  It  is  alleged  that  the 
modem  Alton  facilities  at  Kansas  City  would  also  well  serve  the  Frisco.  The  pro- 
vision of  a  coal  supply  from  the  lines  of  the  Alton  is  also  a  factor  of  importance  to  the 
Frisco.  Macoupin  and  Sangamon  counties  in  Illinois,  traversed  by  the  Alton,  rank 
third  and  fourth  in  production  among  the  districts  of  Illinois.  For  50  miles,  from 
Carlinville  to  Springfield,  abundant  coal  supply  is  found.  The  Alton  in  1918  shipped 
3,364,000  tons  of  coal  from  Illinois  and  290,817  from  Missouri  mines  in  the  vicinity  of 
Higbee,  Mo.  Evidently  an  adequate  supply  of  fuel  for  company  use  and  for  general 
consumption  throughout  the  southwest  will  be  afforded  by  this  merger  of  the  Alton 
in  the  Frisco  system.  Nor  is  this  recommendation  prejudicial  to  the  competing 
system  built  upon  the  Missouri  Pacific.  For  that  system  already  has  adequate  com- 
munication between  Kansas  City  and  St.  Louis;  so  that  the  Chicago  &  Eastern  Illi- 
nois amply  suffices  for  its  Chicago  entrance  and  at  the  same  time  gives  that  system 
a  coal  supply  from  along  its  line  well  matched  against  the  production  of  the  Alton. 

The  Missouri  Pacific  system,  portrayed  on  map  26,  assumes  the  shape  of  a  wide- 
open  fan,  ranging  widely  all  over  the  territory  between  Pueblo,  Colo.,  on  the  west 
and  Hhe  mouth  of  the  Mississippi  River.  The  system  in  1918  operated  7,108  miles 
of  line,  of  which  about  6,800  were  owned  in  fee.  This  compares  with  the  Frisco 
mileage  of  5,064,  owned  and  operated.  The  Missouri  Pacific  therefore  is  substan- 
tially larger  already,  as  a  nucleus  for  the  second  great  competing  southwestern  system, 
to  match  against  the  Frisco.  Moreover,  as  a  result  of  its  reoi^nization.  and  because 
of  the  historic  association  between  it  and  the  other  so-called  Gould  lines  in  Texas, 
there  is  a  greater  degree  of  unity  in  the  geographic  layout  than  is  evinced  by  the 
Frisco.  The  reorganization  in  1917  merged  the  St.  Louis,  Iron  Mountain  &  Southern 
Railway  down  along  the  Mississippi  Valley,  with  the  old  Missouri  Pacific  Railway, 
which  formerly  comprehended  only  the  lines  due  west  from  St.  Louis  in  Missouri  and 
Kansas.  The  other  Gould  properties,  separately  shown  on  map  26 — such  as  the 
Texas  &  Pacific  and  the  International  &  Great  Northern — are,  in  other  words,  more 
integrally  related  to  the  main  stem  than  if  they  had  always  been  controlled  by  inde- 
pendent and  perhaps  competitive  owners. 

A  weakness  of  the  Missouri  Pacific  system,  however,  as  at  present  constituted  is 
at  once  apparent  upon  examination  of  the  map  (26).  This  is  the  sharp  separation 
on  the  two  flanks  of  the  Ozarks  between  the  western  and  the  southern  hal  ves.  These 
are  at  present  united  only  by  two  long  bridge  lines  running  northwest-southeast 
over  the  Ozark  uplands  or  along  the  valley  of  the  Arkansas  River.  Nor  is  this  dis- 
ability a  slight  one  in  view  of  the  growing  importance  of  tlu*ough  traffic  to  the  Gulf. 
The  lack  of  a  direct  north-and-south  route,  especially  from  Kansas  City,  has  in  the 
past  proved  a  serious  handicap.  From  St.  Louis,  taken  in  connection  with  the 
Texas  &  Pacific  and  the  International  &  Great  Northern,  the  old  Iron  Mountain 
route  had  lines  both  to  New  Orleans  and  Galveston.  But  as  connecting  the  original 
Missouri  Pacific  Railroad,  lying  west  of  the  Ozarks,  and  Tx)uisiana  and  Texas  points, 
the  disability  was  very  great.  Carriage  by  way  of  Coffey ville,  Kans.,  then  down 
the  Arkansas  River  Valley  to  Little  Rock,  and  thence  by  a  sharp  turn  back  toward 
Galveston  was  assuredly  zigzag.  The  so-called  Womble  branch  was  originally  in- 
tended to  bridge  the  last  gap  in  a  direct  route.  It  was  never  completed.  Under 
this  plan  there  is  no  longer  need  for  it.  As  against  this  route,  the  Kansas  City  South- 
ern Railway  goes  straight  as  an  arrow  from  Kansas  City  (see  map  26)  down  the  eastern 
boundary  of  Kansas,  Oklahoma,  and  Texas  to  the  Gulf.  Nothing  could  be  shorter 
than  this  competitive  route,  which,  of  course,  got  most  of  the  long-haul  lucrative 
traffic.  WTiatever  business  was  held  by  the  Missouri  Pacific  was  of  necessity  carried 
at  an  inordinate  cost  by  reason  of  the  circuitous  routing.  To  remedy  this  defect  it 
is  recommended  that  the  Kansas  City  Southern  Railway  be  included  in  the  Missouri 

63 1.  C.  C. 


Pacific  system.  Merger  of  the  two  provides  a  supplementation  for  each  of  its  own 
individual  shortcomings.  A  far  better  through  route  is  afforded  between  Kansas 
City  and  New  Orleans  than  was  afforded  by  either  route  alone.  For  the  short  line 
from  Kansas  City  to  New  Orleans  at  present  consists  of  the  Kansas  City  Southern  to 
Shreveport,  thence  over  the  Louisiana  Railway  &  Navigation  Company  to  New 
Orleans.  But  this  latter  line  having  been  taken  from  the  Frisco  system,  the  Texas 
&  Pacific  answers  practically  as  well.  The  Kansas  City  Southern,  on  its  part,  also 
gains,  because  access  is  provided  more  freely  to  the  great  Gulf  ports  without  leaving 
the  road  entirely  dependent,  as  at  present,  upon  its  own  outlet  at  Port  Arthur.  Such 
merger  of  the  Kansas  City  Southern  in  the  Missouri  Pacific  system  is  confidently 
recommended  as  operating  in  the  public  interest. 

Financial  considerations  of  weight,  as  provided  by  the  statute,  commend  the 
merger  of  the  Kansas  City  Southern  with  the  Missouri  Pacific.    Consideration  of  the 
table  on  page  617  discloses  practically  the  same  percentage  return  of  net  operating 
income  to  investment  for  each.    The  Missouri  Pacific  in  1917  earned  3.96  per  cent, 
as  against  the  corresponding  figure  of  3.95  for  the  Kansas  City  Southern.    But  this 
similarity  is  only  apparent.    The  investment  account  reveals  a  striking  difference. 
The  capital  statement  of  the  Kansas  City  Southern  in  1917  was  practically  four  times 
that  of  the  Missouri  Pacific.    At  $203,710  per  mile  of  Une,  it  is  more  than  double  the 
next  highest  figure  for  this  region— $99,423  per  mile  of  line.    The  investment  account 
of  the  Missouri  Pacific  stands  at  only  $51,216  per  mile  of  line.    This  is,  of  course,  due 
in  part  to  the  great  network  of  lightly  built  branch  lines;  whereas  the  Kansas  City 
Southern  is  practically  all  main  track.    It  is  a  stem  line  from  one  end  to  the  other. 
The  Missouri  Pacific  investment  account  was  presumably  scaled  down  in  the  recent 
reorganization,  although  as  a  matter  of  fact  the  outstanding  capitalization  actually 
increased  by  4.42  per  cent.    But  while  the  investment  account  of  the  Kansas  City 
Southern  per  mile  of  line  is  fourfold  that  of  the  Missouri  Pacific,  its  net  operating 
income  is  practically  double.    The  indications  are  that  the  investment  account  is 
still  excessive,  due  allowance  being  made  for  the  physical  characteristics  and  history 
of  the  two  properties.    Federal  valuation  will  doubtless  reveal  the  situation  more 
clearly.    But  with  a  reduction  of  the  Kansas  City  Southern  investment  account,  its 
relative  earning  power  would  be  correspondingly  enhanced.    The  road  is  assuredly 
in  the  best  condition  perhaps  of  any  property  within  this  group,  and  its  strength, 
largely  built  upon  its  main-Hue  business,  should  be  properly  utilized  to  support  the 
great  extent  of  branch  mileage  of  the  Missouri  Pacific.    Unless  the  theory  of  the 
statute  is  at  fault,  this  is  the  procedure  which  is  called  for  by  law. 

An  improvement  now  being  developed  by  the  Kansas  City  Southern  in  order  to 
make  it  a  low-grade  line  to  the  Gulf  is  under  way.  At  present  the  main  line  south 
of  Joplin  has  some  grades  as  high  as  1.4  per  cent,  through  the  western  foothills  of  the 
Ozarks.  Swinging  the  road  farther  to  the  west,  out  into  the  flat  country,  would  make 
it  possible  to  eliminate  this  handicap.  Negotiations  are  now  in  hand  for  trackage 
rights  over  the  Kansas,  Oklahoma  &  Gulf  (see  map  26)  from  Joplin,  through  Baxter 
Springs  down  to  Muskogee,  Okla.  Thence  trackage  is  to  be  taken  over  the  Missouri 
Pacific  back  to  the  main  line  of  the  Kansas  City  Southern  at  Sallisaw,  Okla.  This 
detour  would  give  a  low-grade  line  with  a  maximum  of  0.5  per  cent  grade  to  be  utilized 
for  through  freight  only.  The  old  main  line,  still  tapping  important  territory,  would 
be  utilized  for  passenger  and  lighter  business.  The  significance  of  this  proposal  is 
that  it  suggests  at  once  the  inclusion  in  the  Missouri  Pacific  system  of  the  entire 
Kansas,  Oklahoma  &  Gulf  road.  The  purpose  of  this  is  at  once  disclosed  by  consid- 
eration of  the  map.  It  would  give  the  Missoiui  Pacific  system,  as  enlarged,  a  line 
directly  matching  and  paralleling  the  Katy  between  Muskogee  and  Denison,  Tex. 
This  would  open  up  at  once  also  another  through  route  between  Kansas  City  and 
Galveston.  The  inclusion  of  the  Kansas,  Oklahoma  &  Gulf,  unfortunately,  would 
63LO.C. 

63763—21 12 


^\ 


i: 


■\. 


630 


INTERSTATE   COMMERCE   COMMISSION    REPORTS. 


add  a  liability  rather  than  an  asset,  as  at  present  operated.  The  road,  according  to 
the  returns  for  1917,  had  a  net  operating  income  deficit  of  $251  per  mile  of  line.  Its 
investment  account  of  $38,049  seems  not  abnormal  by  comparison  with  its  neighbors. 
Doubtless  the  property  is  in  poor  shape.  But,  judging  by  the  map,  it  possesses  a  line 
which  if  incorporated  upon  suitable  financial  terms  would  provide  a  necessary  link 
in  the  enlarged  system.  Two  other  minor  additions  to  the  Missouri  Pacific  system 
should  be  enumerated.  Each  has  already  been  discussed  in  connection  with  the 
Frisco  consolidation.  One  is  the  line  of  the  Katy,  as  shown  on  map  26,  from  Fort 
Smith  into  Oklahoma  City,  with  the  side  line  through  Tulsa  into  Muskogee.  The 
other  proposed  addition  is  that  of  the  northern  half  of  the  Kansas  City,  Mexico  & 
Orient  road  from  Wichita  to  Altus,  Okla.,  near  the  Texas  boundary.  This  is  part  of 
the  arrangement,  as  it  will  be  recalled,  under  which  this  property  was  to  be  divided, 
the  southern  half  to  go  to  the  Frisco  system,  reserving  this  northern  half  in  order  to 
give  the  Missouri  Pacific  group  a  line  down  through  western  Oklahoma. 

Another  small  addition  to  the  Missouri  Pacific  system  is  that  of  the  Louisiana  & 
Arkansas.  This  is  one  of  the  little  independent  roads  so  characteristic  of  the  region. 
It  extends  from  Alexandria,  La.,  northwest  to  Hope,  Ark.  The  location  is  dotted  on 
map  26.  Judging  by  the  map,  this  line  closely  parallels  both  the  Louisiana  Railway 
&  Navigation  Company  (Frisco  system,  map  25)  and  the  Texas  &  Pacific  Railway 
(Missouri  Pacific,  map  26).  It  is  diflBcult  to  decide  whether  it  is  more  serviceable  to 
the  one  or  the  other;  but  on  the  whole,  because  of  the  fact  that,  with  its  line  to  the 
east  opposite  Natchez,  Miss.,  it  ties  into  the  Missouri  Pacific  system  at  tliree  points 
it  is  recommended  for  inclusion  therein.  Along  with  this  there  seemingly  should 
also  be  merged  with  this  system  the  Fort  Smith  &  Western,  which  is  depicted  on 
map  26,  as  running  across  Oklahoma,  roughly  between  Fort  Smith,  Ark.,  and  Guthrie, 
Okla.  It  provides  further  representation  for  the  Missouri  Pacific  in  Oklahoma,  where, 
as  a  whole,  the  Frisco  system  is  already  richly  represented.  This  little  road  also  must 
be  regarded  as  a  liability  rather  than  an  asset,  its  net  operating  income  being  equal 
only  to  0.67  per  cent  on  the  investment  in  road  and  equipment  for  1917.  The  Louisiana 
&  Arkansas  was  in  better  case,  with  a  corresponding  figure  of  2.95  per  cent.  Neither 
of  these  results  is  very  encouraging,  but  if  the  policy  be  to  include  all  the  odds  and 
ends,  these  properties  must  certainly  be  taken  in. 

What  shall  become  of  the  mileage  in  the  Missouri  Pacific  system  (map  26)  north 
and  west  of  Kansas  City?    A  rigid  application  of  the  principle  of  territorial  sub- 
division  would  lead  to  the  amputation  both  of  the  main  river  line  up  to  Omaha  and 
of  the  branch  extending  far  across  northern  Kansas  and  up  into  Nebraska  at  Hastings. 
It  has  been  urgently  represented  t^iat  these  should  be  transferred  to  one  of  the  trans- 
continental groups.    And  the  force  of  this  contention  is  conceded  as  to  the  Kansas 
branch.    This  does  not  properly  belong  in  a  Southwestern-Gulf  system.     It  lies  in 
the  territory  of  the  Union  Pacific,  the  Rock  Island,  or  the  Santa  Fe.    Decision  is 
reserved  as  to  its  precise  allocation,  and  of  course  it  would  do  no  particular  harm  to 
let  it  rest  where  it  is.     But  if  a  desire  should  develop  among  any  of  these  transcon- 
tinental lines  for  additional  mileage  in  this  region,  it  is  believed  that  a  transfer  would 
be  not  incompatible  with  the  public  welfare.    Not  so  with  the  main  river  line  up 
to  Omaha.    This  is  as  important  to  the  Missouri  Pacific  system,  especially  in  the 
carriage  of  packing-house  products,  as  is  the  Kansas  City-Memphis-Birmingham  line 
in  the  Frisco  group.    It  might,  of  course,  be  transferred  to  the  Union  Pacific-North 
Western  system  (map  15),  in  order  to  match  it  against  the  corresponding  line  on  the 
east  bank  of  the  river  in  the  Burlington  system  (map  16).    For  these  two  great  systems 
are  not  at  present  evenly  matched  in  this  regard.    If  the  line  went  anywhere  else, 
Buch  should  be  its  destination.    But  the  Missouri  Pacific  systemn  eeds  upbuilding  in 
order  to  sustain  its  heavy  burden  of  branch  mileage.    The  Union  Pacific  can  do 
without  it.    It  is  therefore  recommended  that  no  such  transfer  take  place  and  that 
conditions  as  to  the  Omaha  line  be  left  undisturbed. 

63 1.  C.  C. 


CONSOLIDATION   OF   RAILROADS. 


631 


The  status  of  the  Missouri  Pacific  line  into  Colorado,  under  the  plans  propoaed  for 
transcontinental  merger,  is  somewhat  disquieting.  The  problem  is  not  peculiar  to 
this  line.  It  attaches  likewise  to  the  Rock  Island  and  possibly  to  the  Santa  Fe  Unea 
into  Colorado.  Combining  the  Denver  &  Rio  Grande  with  the  Burlington,  or  with 
any  other  great  system,  for  that  matter,  automatically  tends  to  close  the  through  line 
to  outsiders.  There  is  always,  of  course,  a  certain  amount  of  local  business,  and  it 
would  appear  as  if  at  all  events  the  Missouri  Pacific  should  have  trackage  up  to  Den- 
ver. The  interchange  of  the  Missoiu-i  Pacific  with  the  Denver  &  Rio  Grande  was 
considerable  in  1917.  Not  less  than  526.000  tons  were  delivered  to  the  Denver  & 
Rio  Grande,  and  828.000  tons  were  received  back  from  it.  The  seasonal  character  of 
the  business  indicates  that  much  of  it  consisted  of  agricultural  products.  So  serious 
would  be  the  loss  of  this  business  that  one  is  almost  tempted  to  recommend  the  bodily 
transfer  of  this  Denver  division  to  the  Burlington  system.  As  constituted  under  this 
plan,  the  Burlington  system  has  no  appreciable  mileage  in  Kansas  (map  16)  to  match 
against  the  Union  Pacific  Une,  which  traverses  that  state  from  end  to  end  due  west 
from  Kansas  City  (map  15).  This,  in  fact,  is  the  old  line  of  the  Kansas  Pacific.  Its 
status  seems  to  be  largely  that  of  a  provincial  road  within  the  present  Union  Pacific 
system.  Conceivably  this  Missouri  Pacific  Denver  line  might  go  to  the  Burlington 
system  in  order  to  give  it  something  to  match  with  the  Kansas  mileage  of  its  great 
competitor.  The  suggestion  is  made  only  tentatively,  however,  subject  to  confirma- 
tion upon  further  inquiry. 

The  disposition  of  the  Colorado  &  Southern  Railway,  with  its  Texas  line,  known 
as  the  Fort  Worth  &  Denver  City,  is  a  matter  of  peculiar  difficulty,  owing  to  the  fact 
that  these  properties  are  concerned  both  in  transcontinental  business  and  also  engage 
in  through  carriage  to  the  Gulf  of  Mexico.  Their  national  function  is  to  afford  a 
short  and  direct  line  from  Galveston  through  to  the  far  northwest  by  way  of  Denver. 
Following  this  course,  all  of  the  east-and-west  transcontinental  routes  are  cut  at  right 
angles.  Because  of  existing  stock  control  by  the  Chicago,  Biu-lington  &  Quincy, 
their  status  is  discussed  primarily  in  chapter  V,  and  reasons  are  there  given  for  the 
hesitancy  in  a  definitive  allocation  to  this  Southwestern-Gulf  group  of  roads  of  the 
line  between  Denver  and  Fort  Worth.  The  final  choice,  as  there  stated,  must  be 
made  between  transfer  of  this  important  bridge  line  either  to  the  Santa  Fe,  to  the 
Rock  Island-Southern  Pacific  system,  or  to  the  Missouri  Pacific.  But  one  point  that 
is  definitely  settled  is  that  this  portion  of  the  Colorado  &  Southern  system  should 
not  remain  in  the  control  of  the  Burlington.  The  main  reason  therefor  is  that  such 
extension  carries  one  of  the  principal  northern  transcontinental  railroads  clear  out- 
side its  natural  territory— unless,  indeed,  one  is  equally  to  extend  the  Union  Pacific 
system,  which  is  matched  against  the  Biu-Hngton  for  transcontinental  purposes.  And 
the  way  to  accomplish  this  last-named  transfer  is  closed  by  other  disposition  of  the 
Kansas  City  Southern,  as  herein  made  (p.  628,  supra).'  The  projection,  in  other 
words,  of  the  Biu-lington-Northern  Pacific  transcontinental  system  into  the  Okla- 
homa and  Texas  field,  if  continued,  entails  such  other  amplifications  as  to  completely 
upset  the  plan  for  evenly  balanced  east-and-west  competitive  systems.  One  of  the 
express  purposes,  indeed,  in  the  differentiation  of  the  Southwestern-Gulf  propertit-s 
from  the  transcontinental  railroads  would  be  fnistrated  thereby. 

The  respective  claims  of  the  Santa  Fe  and  the  Rock  Island-Southern  Pacific  for 
control  of  the  Colorado  &  Southern  south  of  Denver  being  also  discussed  in  chapter 
V  as  elements  in  the  transcontinental  situation,  it  is  here  and  now  pertinent  to  set 
forth  aflinnatively  the  reasons  for  including  it  instead  in  the  Southwestern-Gulf 
group.  In  this  latter  region  it  would  be  treated  as  a  distinctly  neutral  road  for  trans- 
continental traffic.  Through  connection  at  the  various  junctions  it  could  handle  all 
the  business  destined  to  the  Gulf  ports  ^fdth  strict  impartiality.  The  proposal  is 
indorsed  by  the  late  regional  director  of  the  western  federal  Railroad  Administration. 
63  I.  C.  C. 


N 


i 


632 


INTERSTATE   COMMERCE   COMMISSION    REPORTS. 


But  if  it  be  so  regarded,  choice  must  then  be  made  between  the  Missouri  Pacific  and 
Frisco  systems  which  it  is  planned  to  set  up  hereabouts.    To  the  Missouri  Pacific  the 
Colorado  &  Southern  is  peculiarly  attractive,  because  it  would  serve  to  tie  in  Pueblo, 
Colo.,  already  reached  by  the  forthstanding  stub  of  the  Missouri  Pacific  across  Kansas! 
Moreover,  this  system,  according  to  map  26,  is  pooriy  represented,  as  compared  with 
the  Fnsco,  in  the  panhandle  region  of  Texas,  and  the  Colorado  &  Southern  directly 
traverses  this  field.    It  goes  without  saying  that  the  Une  would  add  financial  strength 
either  to  the  Frisco  or  the  Missouri  Pacific.    The  Fort  Worth  &  Denver  City  in  1917 
earned  7.34  per  cent  upon  its  investment  account,  although  the  Colorado  &  Southern 
only  earned  3.24  per  cent.    But  the  general  financial  status  is  distinctly  higher 
than  that  of  either  of  the  Southwestern-Gulf   roads.     In  how   far  this  earning 
power  is  due  to  the  express  interest  of  the  Burlington  system  is  of  course  indetermi- 
nate.   But  as  against  any  loss  from  this  source  through  its  transfer,  there  would  need 
to  be  set  the  gain  to  accrue  from  a  neutral  relationship  with  all  of  the  other  transcon- 
tinental roads.    As  between  the  two,  according  to  our  statistical  data,  the  need  for 
financial  support  of  the  Frisco  is  somewhat  greater  than  for  the  Missouri  Pacific. 
But  the  layout  on  the  map  points  to  the  Missouri  Pacific  as  the  preferable  recipient. 
It  is  historically  of  interest  that  the  Wichita  Falls  &  Northwestern- the  constituent 
m  the  Katy  system  (map  25)  which  follows  up  the  western  boundary  of  Oklahoma 
and  ends  at  Forgan— was  originally  intended  to  go  on  to  a  Colorado  connection  at 
Trimdad  or  Pueblo.    Its  completion  was  expected  to  break  the  monopoly  which  the 
Colorado  &  Southern  has  so  long  enjoyed  of  the  short  and  direct  Une  between  Denver 
and  Galveston.    Perhaps  some  day  this  will  be  put  through.    In  this  event,  with 
the  Colorado  &  Southern  south  of  Denver  as  a  part  of  the  Missouri  Pacific,  the  two 
Southwestern-Gulf  competitors  would  again  be  ahnost  perfectly  matched  against 
one  another  in  this  r^^ard. 

On  the  whole,  therefore,  weighing  the  evidence  adduced,  it  appears  that  the 
clami  of  the  Missouri  Pacific,  particulariy  for  the  further  support  of  its  Pueblo  divi- 
sion, IS  substantiated,  and  the  road  is  therefore  shown  tentativelv  by  means  of  a 
dotted  line  upon  map  26.  Under  this  consolidation  plan  it  should  finally  rest  either 
here  or  in  one  of  the  two  competing  southern  transcontinental  systems. 

The  Missouri  Pacific  system  as  thus  amplified  has  a  certain  interest  in  the  so-called 
Gulf  Coast  Lines.    This  latter  road,  as  shown  on  map  22,  closely  parallels  the  sea- 
board all  the  way  from  the  Mexican  frontier  up  to  New  Orieans.     From  Beaumont, 
Tex.,  east  to  DeQuincy,  there  is  an  important  stretch  wherein  the  Gulf  Coast  Lines 
rely  upon  the  Kansas  aty  Southern  entirely  for  trackage  to  connect  the  two  halves 
of  their  extensive  system.    The  Kansas  City  Southern  (map  26)  as  it  approaches  the 
Gulf  turns  sharply  to  the  west,  parallel  to  the  coast,  just  where  it  forks  at  DeQuincy. 
The  trackage  relationship  thiks  set  up  between  the  Gulf  Coast  Lines  and  the  Kan.«as 
(Hty  Southern  is  quite  intimate,  and  it  seems  not  unlikely  that  a  reciprocal  favor 
might  be  extended,  giving  trackage  to  the  Kansas  City  Southern  over  the  Gulf  Coast 
into  Houston.    Such  trackage,  dotted  on  the  map,  .serves  to  tie  in  what  would  other- 
wise be  widely  separated  operating  units.    The  advantage  of  such  connnection  is 
often  times  great  in  the  matter  of  car  supply.    It  enables  a  prompt  provision  of  equip- 
ment in  time  of  need.    The  Missouri  Pacific  interest  in  the  Gulf  Coast  Lines  is  evi- 
denced in  the  daily  trainload  through  the  crop  season  out  of  the  Brownsville  dis- 
trict, which  moves  through  Houston  over  the  International  &  Great  Northern  to  Long- 
view,  thence  over  the  Texas  &  Pacific  to  Texarkana.    At  this  point  another  train- 
load  daily  of  California  products  is  reclassified  with  it,  and  the  two  move  to  St.  Louis 
over  the  Mi3.souri  Pacific  stem.    All  of  these  connections,  it  will  be  noted,  are  in  the 
Missouri  Pacific  group  of  roads.    On  this  basis  it  is  reommended  that  the  southern 
half  of  the  Gulf  Coast  Lines,  from  Beaumont  on,  be  assigned  to  this  svstem.    From 
DeQuincy  ea^t,  as  elsewhere  described,  the  Gulf  Coast  Lines  go  to  the  Santa  Fe  for 

63 1.  C.  C. 


CONSOLIDATION   OF   RAILROADS. 


633 


an  entrance  into  New  Orleans.  This  division  of  the  Gulf  Coast  Lines  dovetails  in, 
it  will  be  observed,  with  the  break  in  its  owned  mileage  between  Beaumont  and  De- 
Quincy. 

In  connection  with  access  to  Houston  the  proposal  has  also  been  made  that  trackage 
should  be  given  over  the  Houston  East  &  West  Texas.  This  would  unquestionably 
give  a  more  direct  line  into  Shreveport.  But  inasmuch  as  trackage  (map  25)  has 
already  been  recommended  for  the  Frisco  over  this  subsidiary  of  the  Southern  Pacific 
system,  it  is  not  believed  to  be  desirable  to  superadd  anything  further.  The  need 
is  by  no  means  as  great  for  this  entry  into  Houston  for  the  Missouri  Pacific  system  as 
it  appeared  to  be  in  the  Frisco. 

The  necessity  for  a  Chicago  line  \vithin  the  enlarged  Missouri  Pacific  system  having, 
it  is  believed,  been  demonstrated,  it  is  recommended  that  the  western  half  of  the  Chi- 
cago &  Eastern  Illinois,  as  shown  on  map  26,  be  incorporated  within  this  system.  At 
present,  to  be  sure,  there  is  a  somewhat  heavier  interchange  of  the  Missouri  Pacific 
with  the  Chicago  &  Alton  than  with  this  road.  In  October,  1920,  for  example,  the 
Missouri  Pacific  received  482  carloads  at  St.  Louis  and  Dupo,  111.,  from  the  Alton 
as  against  only  164  from  the  Chicago  &  Eastern  Illinois.  Coincidently  it  delivered 
720  to  the  Alton  and  only  373  to  the  other  road.  But  this  indicates  no  physical  dis- 
ability of  the  latter  road.  It  is  the  judgment  of  those  best  informed  that  the  Chicago 
&  Eastern  Illinois  is  the  most  natural  connection  for  the  Missouri  Pacific  into  Chicago. 
The  balance  of  the  Chicago  &  Eastern  Illinois,  it  will  be  remembered  (page  597,  supra)  ^ 
is  recommended  for  inclusion  in  the  St.  Paul-Great  Northern  system.  It  is  not  alone 
that  this  Chicago  connection  is  direct  and  in  good  condition  for  service.  The  Chicago 
&  Eastern  Illinois  has  also  been  recently  reorganized  in  order  to  bring  its  capitaliza- 
tion into  Une  with  its  earning  power  and  its  physical  valuation.  But  the  recommenda- 
tion is  also  made  because  of  the  fuel  supply  for  the  southwest,  which  such  a  merger 
would  provide.  Chicago  &  Eastern  Illinois  coal  tonnage  in  general  is  derived  from 
two  distinct  fields.  One  of  these,  known  as  the  central  Illinois  field,  is  directly 
northeast  of  East  St.  Louis.  The  other,  the  southern  Illinois  field,  lies  south  of 
St.  Elmo,  along  the  line  of  the  southerly  fork  of  the  Chicago  &  Eastern  Illinois, 
just  below  the  crook  in  it  (map  26).  The  coal  from  this  southern  Illinois  field  prac- 
tically all  goes  into  the  southwest  by  way  of  the  Thebes  bridge,  or  into  the  southeast 
via  Joppa.  In  either  event,  the  carriage  is  by  way  of  the  Chicago  &  Eastern  Illinois. 
And  in  this  way  this  road  feeds  directly  into  the  Missouri  Pacific  system.  On  the  other 
hand,  the  coal  from  the  eastern  half  of  the  Chicago  &  Eastern  Illinois,  as  shown  on 
map  5  by  means  of  the  heavier  designation,  all  moves  north  for  consumption  in  Chicago 
or  beyond.  The  western  half  of  the  Chicago  &  Eastern  Illinois  is  thus  allocated  to 
the  Missouri  Pacific  not  only  for  fuel  purposes,  but  because  it  affords  all  of  the  connec- 
tion which  the  Missouri  Pacific  requires  with  the  other  Missouri  River  gateways. 
For,  as  heretofore  described  in  connection  with  the  Frisco  system,  the  Missouri  Pacific 
already  has  one  good  low-grade  river  line  between  Kansas  City  and  St.  Louis.  It  has 
also  been  given  a  second  track,  it  will  be  recalled,  by  taking  the  Katy  river  line  east 
of  Boonville.  The  portion  of  the  Chicago  &  Eastern  Illinois  reserved  for  the  Chicago 
bridge  line  is  tenuous  to  be  sure,  as  map  26  indicates,  but  it  is  believed  that  it  affords 
both  the  fuel  supply  and  the  through  connection  which  is  required  for  the  service 
of  its  proposed  parent  system.  An  operating  advantage  which  still  further  commands 
this  arrangement  is  the  traffic  to  and  from  Chicago  and  New  Orleans  and  east  Texas 
points,  which  could  be  handled  down  the  east  side  of  the  Mississippi  River  to  Illmo. 
This  would  obviate  the  necessity  of  routing  much  business  through  the  congested 
terminals  either  of  St.  Louis  or  East  St.  Louis. 

The  plan  under  which  the  two  Southwestern-Gulf  systems,  as  heretofore  developed 
under  this  plan,  match  one  another  throughout  their  common  territory  is  disclosed  by 

63 1.  C.  C. 


634 


I.XTERSTATE   COMMERCE   COMMISSION'    REPORTS. 


CONSOLIDATION   OF  RAILROADS. 


635 


i!^! 


W' 


l! 


map  26- A.    The  manner  in  which  all  of  the  leading  cities  are  constituted  common 
points  through  the  entry  of  each  of  these  evenly  balanced  competitors,  is  so  clearly 
s  it  forth  as  scarcely  to  require  comment.     And  yet  in  order  to  confirm  the  demonstra- 
tion, attention  is  especially  directed  to  the  two  Unos  into  New  Orleans,  into  Galveston 
and  San  Antonio,  and  the  two  matching  lines  far  flung  across  western  Texas.    And  as 
for  direct  through  lines  from  Kansas  City  and  St.  Louis  respectively  to  New  Orleans  and 
Galveston  respectively,  those  essential  routes  have  already  been  described  minutely. 
Broadly  \-iewed.  the  Missouri  Pacific  system  is  still  substantially  stronger  in  the  lower 
Mississippi  Valley;  and.  per  contra,  the  Frisco  has  the  advantage  in  western  Oklahoma. 
But  all  such  minor  differences  might  readily  be  dealt  with  through  new  constniction 
in  the  futiire,  in  pursuance  of  a  carefully  de\'ised  plan.    The  control  henceforth  which 
the  Commission  may  exercise  over  new  constniction  affords  an  opportunity  to  direct 
aTairs  in  such  a  manner  as  still  further  to  promote  even-handed  competition.    One  of 
the  leading  traffic  officials  characterized  this  plan  as  presenting  "wonderful  possi- 
bilities "  for  the  future.     Whatever  these  may  be,  it  is  submitted,  must  arise  from  some 
such  orderly  rearrangement  of  corporate  relationships  as  is  herein  cnidely  set  forth. 

The  table  on  page  617  and  exhibit  7  bring  out  the  relative  earning  power  in  terms  of 
investment  account  for  the  Southwestern-Gulf  region,  based  as  always  upon  the  type 
year  1917 .    It  establishes,  so  far  as  these  figures  can  be  rehed  upon,  a  low  yield,  which 
was  all  that  one  might  expect  from  this  undeveloped  and  over-befailroaded  territory. 
The  encouraging  feature,  however,  if  the  theory  of  this  consolidation  plan  be  sound, 
is  the  substantial  equality  of  the  return  between  the  two  great  systems.    For  the 
Frisco  the  rate  is  3.06  per  cent  on  investment  account;  while  for  the  Missouri  Pacific 
it  is  3.75  per  cent.    But  these  figures  may  not  stand  as  baldly  stated,  for  an  instant 
inspection  of  the  data  concerning  investment  per  mile  of  line  shows  that  the  Frisco 
capital  account  is  approximately  25  per  cent  greater  than  that  of  the  Missouri  Pacific 
system.    Specifically  the  investment  account  for  the  Frisco  stands  at  $72,924  per  mile 
of  line  as  against  that  of  the  Missouri  Pacific  of  $57,920  per  mile  of  line.    The  former, 
in  other  words,  is  25  per  cent  greater  than  the  latter.    Yet  there  is  no  evidence  that  in 
any  large  way  the  Frisco  property  is  correspondingly  worth  as  much  more  than  the 
other,  as  this  investment  account  apparently  indicates.    The  predilection  is  entirely 
in  favor  of  a  substantial  writing  down  of  the  Frisco  account  and  in  fact  probably,  as 
will  subsequently  appear  in  the  succeeding  chapter,  of  a  substantial  reduction  of  both 
capital  accounts.    Certainly  there  is  no  sound  warrant  for  the  disparity  in  this  regard 
as  between  the  two  systems  lying  side  by  side  throughout  this  region.     For  this  reason 
it  is  submitted  that  a  correction  may  justifiably  be  made  in  the  Frisco  returns.    To 
write  down  the  capital  account  by  one-fifth  would  automatically  write  up  the  rate  of 
return,  bringing  it  from  3.06  per  cent  to  a  sul)stantial  eqidvaient  with  that  of  the 
Missouri  Pacific,  standing  at  3.75  per  cent  per  mile  of  line. 

The  uniformity  of  earning  power  obtainable,  supposing  that  the  returns  for  the  type 
year  1917  be  regarded  as  once  more  possible  with  the  reestabhshment  of  normal  operat- 
ing conditions,  is  noteworthy.  ParticiUarly  is  this  significant  when  taken  in  con- 
nection with  the  investment  in  road  and  equipment  according  to  this  showing.  But 
one  further  step  remains,  namely  to  check  up  the  investment  account  by'^federal 
valuation,  and  this  step  is  reserved  for  the  succeeding  chapter,  a  general  recapitulation. 

•  .  63LC.C. 


Chapter  VII. — Recapitulation. 

R^sum^  and  broader  aspects  of  consolidation  policy,  especially  as  respects  govern- 
ment ownership,  635.— Conspectus  of  the  plan,  proposing  21  independent  sys- 
tems, and  comment  upon  the  summary  map  of  their  respective  locations,  636.— 
Their  relative  extent  and  volume  of  traffic,  638.— General  assembly  of  statistics 
of  earning  power,  with  comment  upon  regional  variations,  640.— Capital  account 
now  compared  with  physical  valuation,  641.— Positive  conclusions  thus  obtain- 
able, discussed  regionally,  643.— Effect  of  consolidation  upon  train  movement, 
643.— And  upon  the  welfare  of  individual  properties,  643. — Extensive  resort  to 
trackage,  avoiding  needless  duplication,  644.— Certain  objectionable  practices 
demanding  legislative  correction,  645.— The  tendency  toward  consolidation  in 
the  British  Isles  significant,  646. 

The  objects  sought  in  the  foregoing  plan  are  as  follows:  An  inherently  natural 
geographic  scope  for  each  system;  a  sound  operating  adaptation  of  each  unit  to  its 
surroundings,  due  consideration  being  given  to  the  nature  of  its  traffic;  administrative 
practicability,  that  is  to  say,  a  size  under  each  particular  set  of  circumstances,  com- 
mensurate with  human  capacity  in  management;  an  ever-present  competition  between 
rival  roads,  in  order  to  insure  the  continuance  of  an  alert  and  accelerated  service  to 
the  public,  assuming  that  the  foregoing  physical  arrangements  have  already  provided 
economical  carriage  by  each  competitor;  and  such  an  equalization  of  earning  capacity 
between  these  competitors,  as  to  perpetuate  such  rivalry  in  service  on  an  even-handed 
and  wholesome  basis.  This  ideal  has  been  otherwise  well  described  by  Chairman 
Clark  of  the  Interstate  Commerce  Commission,  as  a  service  "rendered  by  large 
systems  with  their  component  parts  properly  coordinated  under  a  common  policy 
rather  than  by  a  substantial  number  of  weaker  and,  in  some  instances,  impecunious 
systems,  each  with  its  selfish  interests  and  its  separate  organization  striving  to  pro- 
mote those  interests. "  All  of  these  requisites  for  a  sound  consolidation  plan,  it  should 
be  understood,  must  of  necessity  be  combined  with  the  least  possible  disturbance  of 
existing  corporate  integrity.  Matters  might  be  quite  differently  arranged,  were  it  not 
for  this  precipient  condition.  And  indeed  it  is  basic,  for  two  reasons.  The  first  is 
that  the  formation  of  a  better  sort  of  competitive  system  than  we  now  enjoy,  must 
in  the  nature  of  things  probably  be  voluntary.  The  other  is  that  the  existing  physical 
instrumentalities,  such  as  division  points,  roundhouses,  residence  of  employees, 
and  the  like,  have  been  closely  coordinated  with  the  present  corporate  structiure. 
Both  of  these  circumstances  therefore  commend,  as  the  most  feasible  governmental 
policy,  a  process  of  induced  although  necessarily  voluntary  trading  between  the 
existing  railroad  companies  through  interchange  of  their  corporate  securities. 

Should  the  policy  of  voluntary  consolidation  not  prevail,  after  due  encouragement 
by  governmental  authority,  it  seems  clear  that  an  added  incentive  to  government 
ownership  will  be  afforded.  In  other  words,  a  failure  to  seek  earnestly  the  economies 
of  large-scale  and  systematic  operation  must  necessarily  strengthen  the  arms  of  those 
who  are  contending  for  the  entire  supersession  of  private  ownership  through  a  govern- 
ment taking.  This  phase  of  the  matter  can  not  be  overemphasized,  in  no  sense  because 
of  antagonism  to  government  ownership,  as  such,  but  merely  that  in  the  final  event 
a  wise  adaptation  of  means  to  the  desired  end  of  the  best  possible  service  at  reasonable 
cost  to  the  people  may  result.  The  issue  of  governmental  versus  private  ownership 
and  operation  of  raiboads  is  constantly  pressing  itself  upon  the  attention  of  the  Con- 
gress and  the  people.  The  principal  argument  in  its  favor  is  that  it  conduces  to 
economy  and  efficiency  because  of  unified  operation.  All  the  wastes  of  competitive 
management,  it  is  alleged,  may  thus  be  avoided.  Nor  can  it  be  denied  that  in  con- 
siderable measiure  such  economies  were  brought  about  in  the  United  States  during 

63  I.  C.  G. 


\ 


636 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION  OF  RAILROADS. 


637 


the  period  of  federal  control.^  Joint  use  of  terminals,  yards,  and  engine  houses,  of 
running  tracks  and  of  motive  power  and  cars;  the  consolidation  of  car-inspection 
forces  and  of  ticket  offices,  with  the  abolition  of  off-line  offices  and  competitive 
consolidation;  the  short  routing  of  freight  and  diversion  of  export  traffic  to  the  best- 
suited  ports;  "sailing  days,"  pooling  of  business,  consolidated  trainloads;  standard- 
ization of  equipment  and  of  operating  statistics;  simplification  of  interroad  account- 
ing— all  these  and  other  eliminations  of  waste  were  either  realized  or  in  process  of 
attainment  during  this  period.  No  impartial  student  can  deny  the  force  of  the  con- 
tention that  unified  operation  in  and  of  itself  is  advantageoujs  both  as  regards  cost 
and  expedition  in  service.  But  it  is  equally  incontrovertible  that  the  cessation  of 
competition  under  a  system  of  complete  regional  monopoly  such,  for  example,  as 
seems  to  be  contemplated  under  the  pending  British  plans,  is  destructive  of  one  of 
the  great  incentives  to  efficiency.  That  was  perhaps  one  reason  why  the  cost  of 
operation  mounted  so  phenomenally  during  the  war.  The  instrumentalities  may  be 
present;  but  the  vigor  and  initiative  which  are  commonly  set  on  foot  through  rivalry 
are  bound  to  be  lessened.  One  of  the  larger  aspects,  then,  of  this  proposed  consoli- 
dation plan  is  that  it  offers  a  third  choice,  in  place  either  of  completely  unified  regional 
ownership  and  operation  with  its  lack  of  incentive,  on  the  one  hand;  or  of  the  economic 
wastes  which  are  incident  to  helter-skelter  competition  between  a  heterogeneous 
congeries  of  more  or  less  imperfectly  developed  properties,  on  the  other.  One  alter- 
native threatens  stagnation;  the  other  has  driven  our  railroads  to  the  verge  of  bank-* 
ruptcy.  May  not  a  well-ordered  consolidation  program  offer  a  way  out,  without 
resorting  to  the  ultimate  expedient  of  government  ownership  from  which,  once 
adopted,  there  can  be  no  withdrawal.  It  is  believed  that  an  opportunity  presents 
itself  to  seek  the  advantages  of  each  of  the  other  arrangements,  with  some  chance  of 
escape  from  their  several  inherent  defects.  Such,  at  least,  is  the  underlying  principle 
contemplated  in  this  plan. 

A  total  of  21  systems  has  resulted  from  the  foregoing  proposals,  made  serially  in 
detail.  These,  it  will  be  recalled,  are  as  follows:  Five  systems  within  the  trunk  Une 
region;  two  lake-to-tide  soft-coal  systems  in  the  Chesapeake  Bay  region;  in  the 
southeast,  four  systems;  five  transcontinental  systems  west  of  the  Mississippi;  and 
two  running  southwest  toward  the  Gulf  ports.  In  addition  to  these,  and  complete 
ing  the  list,  there  are  three  outlying  regional  groups;  in  New  England,  in  the  south- 
em  Michigan  peninsula  and  down  the  east  coast  of  Florida  toward  Cuba,  respectively. 
For  these  21  systems  the  main  stems  are  portrayed  on  map  27.  This  assembles  the 
regional  strategy  of  all  of  the  different  districts.  The  map,  as  it  appears,  throws 
into  the  foreground  certain  primary  bases.  Some  of  these,  like  New  York,  Jackson- 
ville, New  Orleans,  Galveston,  San  Francisco,  and  Seattle,  are  located  along  the 
seacoast  at  nodal  points,  generally  at  the  comers  of  the  great  territorial  divisions, 
trunk  line,  southeastern,  western,  etc.  In  the  heart  of  the  country  there  are  ac- 
tually only  two  primary  strategic  bases,  Chicago  and  St.  Louis,  although  for  the 
southern  territory  the  Ohio  River  gateways  are  in  a  sense  secondary  bases.  And 
Toledo,  Ohio,  and  Norfolk,  Va.,  are  secondary  bases  for  the  group  of  Chesapeake 
Bay  coal  roads.  But  in  the  main  everything  is  based,  centrally,  upon  Chicago  and 
St.  Louis  as  far  as  the  main  stems  are  concerned.  Wherever  possible,  the  systems 
are  brought  in  through  their  main  stems  to  these  points.  But,  as  frequently  reit- 
erated, it  is  proposed  also  to  create  detours  or  alternative  belt  lines,  by  whidi  con- 
gestion may  be  avoided  at  these  great  centers;  and  cross-country  routes  which  shall 
avoid  them  entirely  appear  upon  the  detailed  and  elaborate  maps  for  each  system. 

1  The  best  authoritative  review  of  this  matter  is  the  account  by  Prof.  W.  J.  Cuoningham  in  the  Quar- 
terly Journal  of  Economics,  xxxv,  1921,  pages  288-340. 

63LC.C. 


The  general  practice  of  basing  on  Chicago  and  St.  Louis,  in  the  heart  of  the  coun- 
try, is  exemplified  in  detail  within  each  great  region  upon  the  map  (27).  The  five 
trunk  lines  from  the  Atlantic  seaboard  split  somewhere  in  their  westerly  courses, 
with  branches  to  each  great  central  base.  Similarly  the  five  transcontinental  stems 
which  spread  out  on  the  Pacific  coast,  from  north  to  south,  are  drawn  together  to  the 
pame  dual  base  on  Chicago  and  St.  Louis:  and  from  the  southwest,  likewise,  the  two  sys- 
tems, only  secondarily  based  on  Kansas  City  and  St.  Louis,  each  run  also  irito  Chicago. 
And  of  course  there  is  always,  at  the  junction  points  where  these  main  stems  from 
every  direction  cross  one  another,  the  opportunity  of  free  interchai^e,  avoiding  the 
congested  centers  entirely.  Only  from  the  southeast,  for  the  reasons  fully  set  forth 
in  the  chapter  thereon,  has  it  been  deemed  wise  to  stop  the  systems  at  the  Ohio  River 
and  to  have  them  carried  into  Chicago  and  St.  Louis  over  trunk  line  connections. 

The  objective  of  conformity  to  the  statute  as  respects  competition,  it  will  be  ob- 
served, is  sought  wherever  possible  by  having  each  considerable  city  all  over  the 
United  States  tapped  by  at  least  two  railways;  and  all  of  the  great  competitive  routes, 
hither  and  thither,  are  so  arranged  that  there  is  a  matching  for  competitive  purposes 
everywhere.  Thus,  following  on  map  27  with  the  eye  the  two  southwestern  trans- 
continental systems  eastward,  it  will  be  noted  that  the  Santa  Fe  and  the  Southern 
Pacific-Rock  Island  each  split  in  western  Texas,  with  one  branch  mnning  to  the 
Gulf  and  another  to  the  dual  base  on  Chicago  and  St.  Louis.  For  two  of  the  remain- 
ing three  western  transcontinental  lines  the  same  thing  happens  in  an  inverse  direc- 
tion. Both  the  Union  Pacific  and  the  Burlington-Northern  Pacific  start  out  from 
Chicago  (and  St.  Louis)  and  split  in  order  to  send  arms  to  Seattle  and  San  Francisco, 
respectively.  One,  to  be  sure,  splits  far  back  at  Chicago;  whereas  the  Union  Pacific- 
North  Westem  splits  somewhere  out  in  Wyoming  and  Utah.  The  St.  Paol-Great 
Northern  system  is  the  only  transcontinental  one  which  is  localized  in  the  north. 
And  the  possibility  of  its  future  entrance  into  San  Francisco  is  clearly  foreshadowed. 
But  each  and  every  line  has  another  road  of  approximately  equal  competing  strength 
set  up  to  match  it.  Take  the  southeast  as  another  illustration.  Starting  from  Rich- 
mond one  notes,  going  southwest,  parallel  to  the  seacoast,  that  each  of  the  three 
systems  splits  somewhere  in  the  Carolinas,  with  a  southerly  arm  to  Savannah  and  a 
northerly  one  to  Atlanta.  Or,  from  the  Ohio  River  gateways,  three  roads  enter  from 
the  north,  the  Southem  Railway  at  Cinciimati,  the  Louisville  &  Nashville  at  Evans- 
\ille,  and  the  Illinois  Central  at  Cairo.  All  three  alike  spUt  into  two  arms,  one  of 
which  goes  to  New  Orleans  and  the  other  easterly  to  Savannah  or  Jacksonville,  via 
either  Atlanta  or  Birmingham.  Or,  turning  to  the  Southwestern-Gulf  region,  one 
finds  two  systems  which  really  spring  from  Kansas  City  and  St.  Louis  as  bases  matched 
against  each  other.  They  each,  to  be  sure,  mn  up  to  Lake  Michigan,  but  their  Chi- 
cago operating  divisions  are  mere  bridges.  The  real  originating  stems  lie  southwest 
of  the  Missouri  River  gateways;  and  each  of  the  two  systems  reaches  San  Antonio, 
Galveston,  and  New  Orleans,  albeit  by  routes  which  for  each  particular  city  are 
more  or  less  indirect.  But  by  and  large,  the  difference  in  length  of  haul  between 
each  pair  of  competitive  routes  is  less  than  the  15  per  cent  allowed  under  the  ad- 
ministration of  the  long-and-short-haul  clause.  In  other  words,  the  routes  matched 
against  one  another  are  held  to  be  properly  competitive,  neither  being  so  indirect  in 
length  as  to  unfit  it  for  rivalry  with  the  other. 

The  foregoing  description  of  competitive  routes,  matched  in  pairs,  does  not,  of 
course,  preclude  the  possibility  of  competition  between  a  larger  number  of  roads 
than  two.  At  most  nodal  points,  for  example,  it  will  be  found  that  from  three  to 
five  are  as  likely  to  compete  as  two.  Thus  at  Seattle,  San  Francisco,  Savannah, 
Atlanta,  or  the  twin  cities,  one  discovers  three  systems  in  competition.  At  Galves- 
ton four  systems  enter.    New  Orleans  has  three  systems  from  the  southeast  and  four 

63 1.  C.  C. 


> 


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638 


INTERSTATE   COMMERlK   COMMTSSIOX    KKPOKTr 


from  west  of  the  >assis8ippi.  Kansas  City  wall  be  touched  by  at  least  four  of  the 
transcontinental  lines,  with  the  two  Southwestern-Gulf  systems  in  addition.  In 
short,  as  a  city  rises  in  the  scale  from  third  to  second  or  first  place,  as  a  strategic  cen- 
ter, the  number  of  systems  which  independently  seek  to  provide  competition  in- 
creases. This,  it  is  submitted,  conforms  to  the  spirit  of  the  act.  It  is  inevitable, 
in  any  event,  that  competition  becomes  keener  the  greater  the  commercial  import- 
ance of  the'city.  But  the  progression  under  a  well-ordered  system  seems  to  be  more 
nearly  an  expression  of  the  natural  geographical  fitness  of  that  center,  rather  than, 
as  sometimes  heretofore,  because  of  a  fortuitous  or  artificial,  and  to  that  degree,  leas 
deserved  advantage. 

The  principle  that  earning  capacity  in  terms  of  valuation  constituted  the  ultimate 
test  of  the  feasibility  of  any  proposed  grouping  of  niilroads,  in  contradistinction  to 
any  attempt  to  bring  about  an  al^eolute  equalization  in  size  among  these  projective 
competitive  units,  was  avowedly  adopted  at  the  outset.     The  plan  has  thus  far  l)een 
worked  through  solely  with  this  end  in  view.     Yet  the  relative  magnitude  of  the 
different  systems  proposed  is  not  entirely  immaterial.     An  attempt  has  been  made 
in  the  grand  summary  (exhibit  8)  to  bring  out  the  facts  in  this  regard.     Size,  rela- 
tively, is  shown  in  two  respects.     One  measures  the  volume  of  business  by  the 
revenue  ton-miles.     The  other  finds  expression  in  the  mileage  operated.     The  latter 
shows  the  geographical  scope  of  the  fixed  investment,  whereas  the  revenue  ton-miles 
afford  a  measure  of  the  utilization  to  which  this  mileage  is  subjei  ted.     In  other 
words,  the  revenue  ton-miles  exhibit  the  density  of  traffic  rather  than  the  extent 
of  the  systems  on  the  map.     Ea<  h  of  these  two  testa  of  magnitude  insignificant  for 
its  own  particular  purpose.     With  this  distinction  in  mind,  the  exhibits  above  men- 
tioned may  now  be  considered.     The  range  of  mile^ige  is  < onr^iderable.     Ex<iuding 
the  Florida  East  Coast,  which  of  course  is  not  a  system,  the  smallest  of  the  proposed 
groups  is  the  Chesapeake  &  Ohio,  with  a  mileage  of  2,7«1.     This  is  not  much  ex- 
ceeded by  either  the  Norfolk  &  Western-Virginian,  the  Michigan  peninsula  system, 
or  the  Sea])oard  Air  line.     These  four  constitute  a  group  apart  in  size  from  the  rest! 
For  all  of  the  others  run  above  5,000  miles  of  operating  length;  and  nine  of  them 
exceed  10,000  miles  of  line.     The  contrast  between  the  western  transcontinental 
systems  in  this  respect  and  mast  of  the  others  is  notable.     Four  at  least  of  these 
western  roads  are  approximately  20.000  or  more  miles  long,  a«  operated.     The  only 
approach  to  this  geographical  scope  is  found  in  the  Atlantic  Coast  Line-Ix)ui8ville 
&  Nashville    system  with  14.170  miles  of  lines,  and  in  the  two  Southwestern-Gulf 
systems  with  12,000  and  13.000  miles,  respectively.     Evidently  the  range  is  very 
wide,  especially  as  l)etween  the  western  and  the  tnink  line  or  southeastern  territories. 
Turning  now  to  the  second  index  of  .size,  namely,  revenue  ton-miles,  the  same 
wide  variation  appears  as  in  the  matter  of  miles  of  line.     But  here,  with  the  emergence 
of  the  density  factor,  the  differences  regionally  contra^st  sharply  in  another  way. 
Now  it  is  the  tnink  lines  which  stand  at  the  head,  in  some  cases  with  a  volume  of 
business  50  or  even  100  per  cent  in  excess  of  that  handled  by  the  transc  ontinental 
roads.     Thus  the  proposed  Pennsylvania  system  with  47,871,000  revenue  ton-miles 
is  nearly  twice  as  large  as  either  the  proposed  Buriington  or  Union  Pacific  svstems, 
judging  by  the  returns  for  1917.     And  as  between  the  different  systems  within  each 
region  there  are  also  wide  difference.^.     The  I^kawanna- Nickel  Plate  is  as  much 
smaller  than  its  great  neigh]>or8.  measured  ]>y  revenue  ton-miles,  as  the  Santa  Fe 
system  is  smaller  than  the  other  western  transcontinental  roads.     Likewise,  in  the 
southeastern  region  the  volume  of  business,  in  view  of  the  mileage  operated,  is 
surprisingly  light.     The  retail  character  of  the  New  England  traffic  is  evident.     It 
is  clear  that  the  proposed  systems  are  as  diverse  in  this  respect  of  revenue  ton-miles  as 
they  have  appeared  to  be  in  miles  of  line  operated. 

63  I.  C.  C. 


CONSOLIDATIOX   OF   RAILROADS. 


639 


The  really  significant  feature  of  the  exhibits  respecting  size,  however,  and  one 
which  has  ])een  kc^pt  in  mind  tliroughout  the  evolution  of  this  plan,  is  the  fact  that 
the  load  thrown  upon  any  single  system  for  administrative  purposes  is  kept  well 
below  the  existing  standards.  The  criterion  for  administration  must  necessarily 
be  found  in  the  revenue  ton-miles:  that  is  to  say,  in  the  density  and  the  total  move- 
ment of  traffic.  The  attainment  of  the  Pennsylvania  in  1917  to  47,871,000  revenue 
ton-miles,  followed  next  in  order  by  the  New  York  Central  standing  at  38,477,000 
revenue  ton-miles,  is  not  elsewhere  approached  by  any  of  the  oth^r  proposed  systems. 
And  thcjse  two  great  groups,  above  named,  represent  in  this  plan  not  additions  to 
the  existing  corporate  buv^iness  handled,  but  at  least  in  the  case  of  the  New  York 
Central,  a  substantial  subtraction  therefrom.  The  only  proposed  systems  which 
approach  within  hailing  distance  of  either  the  New  York  Central  or  the  Pennsyl- 
vania in  volume  of  businc^ss  are  the  Baltimore  &  Ohio-Reading,  the  Erie-Lehigh 
Valley- W^abash,  the  Burlington,  and  the  Union  Pacific  systems.  In  fine,  if  it  lie 
within  the  boimds  of  human  capacity  to  operate  the  Pennsylvania  and  the  New 
York  Central  systems  as  at  present  constituted,  there  is  no  reason  to  suppose  that 
these  newly  suggested  systems  are  too  big  to  be  properly  managed.  This  consider- 
ation is  indeed  a  very  vital  one.  Its  significance  could  perhaps  be  better  appre- 
ciated were  it  possible  to  outline  all  of  the  comprehensive  proposals  which  have 
been  in  turn  rejected,  largely  because  of  the  undue  magnitude  of  their  operating 
units.  This  plan,  it  is  confidently  submitted,  has  been  fashioned  with  a  view  to 
withstanding  this  test. 

Another  reason  for  limitation  upon  the  size  and  scope  of  these  proposed  systems 
than  the  one  above  mentioned,  operates  in  the  interest  of  the  local  stations  along 
the  line.  The  question  is  often  raised  why  more  than  two  competing  through  syetems 
are  nece.«?sary.  inasmuch  as  two  are  adecpiate  to  provide  the  competition  in  ser\'i(  e 
called  for  by  the  transportation  act,  W^hy,  in  other  words,  propose  three  com- 
peting sj'stems  in  the  northwest  instead  of  putting  all  of  the  mileage  into  only  two? 
Or  why  have  five  in  tnmk  line  territory  instead  of  four?  It  is  sulimitted  in  answer 
to  this  contention  that  more  and  more  do  the  little  local  communities  along  the  lines 
of  these  primary  railroads  need  encouragement  and  support  in  face  of  the  commercial 
and  industrial  rivalry  of  the  great  centers  of  population.  Too  comprehensive  a 
scheme  of  consolidation  would  unquestionably  operate  to  lessen  the  number  of  tnmk 
lines  between  competitive  centers,  over  each  of  which  there  would  be  provided 
a  main-line  quality  of  transportation.  The  cities  of  the  intermediate  class,  Des 
Moines,  Iowa,  for  example,  can  not  expect  all  of  the  rivalry  which  would  arise 
between  carriers  at  a  primary  center  like  Kansas  City  or  St.  Louis.  But  the  chances 
for  development  attendant  upon  first-class  main-line  service  will  be  considerably 
increased  if  there  are,  for  example,  three  or  four  competing  trunk  lines  of  lai^e 
systems  across  the  state  of  Iowa,  rather  than  a  smaller  number.  It  is  also  true  that 
each  main  stem  of  a  system  may  discover  such  an  advantage  due  to  its  location  or 
connections  as  will  encourage  it  to  specialize  in  certain  classes  of  business.  Upon 
such  foundations  are  reputations  as  a  reward  of  merit  based.  And  such  a  speciali- 
zation of  function  surely  promotes  that  high  grade  of  transportation  which  it  is  the 
aim  of  this  legislation  to  promote.  If,  for  example,  the  system  which  happens  to 
include  the  present  Kansas  City  Southern  continues  to  bend  its  every  effort  to  the 
best  and  quickest  carriage  of  grain  to  the  Gulf  for  export,  and  similarly  if  the  greater 
system  which  comprehends  the  Frisco  line  from  Memphis  to  Birmingham  con- 
tinues to  better  its  special  facilities  for  handling  packing-house  products  or  iron  and 
steel,  each  system  by  so  doing  will  tend  by  the  excellence  of  its  service  especially 
to  promote  the  public  welfare.  There  is  a  certain  danger  that  too  comprehensive 
a  consolidation  scheme  may  be  productive  of  that  very  stagnation  of  initiative  and 
pursuit  which  attaches  to  any  water-tight  regional  scheme — that  of  the  Pnissian 
or  French  railways,  for  example,  or  oi"  the  present  British  government. 

63 1.  C.  C. 


14 


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INTERSTATE  COMMEBCE   COMMISSION   REPORTS. 


A  convenient  check  upon  the  uniformity  of  earning  power  of  these  proposed  systems 
18  aftorded  m  exhibit  8  by  the  net  operating  income  per  mile  of  line.  Obviously  this 
test  may  be  applied  only  »vithin  each  region  taken  by  itself.  But  aesumin-  that  the 
conditions  are  fairly  uniform  within  trunk  line  territory,  let  us  say,  this  exhibit  indi- 
cates a  rather  unexpected  uniformity.  Thus  for  the  Pennsylvania  and  the  New  York 
Central  systems,  as  proposed,  they  are  almost  absolutely  equal;  and  the  Baltimore  & 
Ohio  is  close  upon  them.  The  other  two  trunk  lines  pair  off  at  |6,100  and  $5  900  per 
mile  of  line  respectively— rather  close  correspondence.  Turning  to  the  southeastern 
states,  with  the  exception  of  the  Seaboard'  Air  Line  (always  subnormal)  the  three 
leading  systems  lie  between  $2,400  and  $2,900  per  mile  of  line.  For  the  western 
transcontinental  region  the  range  falls  within  $3,092  and  $3,658  per  mile  of  line  The 
most  completely  satisfying  result  in  this  regard  occurs  in  the  Southwestern-Gulf  re- 
gion, for  the  two  proposed  competing  systems  the  net  operating  income  per  mile  of 
line  falls  almost  exactly  at  $2,000  for  each  one. 

Quite  irrespective  of  size,  the  ultimate  financial  test  of  the  feasibility  of  the  21 
systems  herein  proposed  is  applied  by  the  subjoined  table.  The  significant  feature  is 
the  right-hand  column,  bringing  out  the  net  operating  income  in  percentage  of  invest- 
ment. Further  details  concerning  this  relationship  are,  of  course,  to  be  found  in  the 
grand  summary  (exhibit  8)  herewith,  from  which,  in  fact,  these  particular  figures  are 
compiled.  This  table,  it  will  be  recalled,  merely  assembles  the  data  already  shown 
at  the  close  of  each  chapter,  dealing  with  the  various  regions  one  after  another-  and  the 
relativity  within  each  region,  that  is  to  say,  the  earning  capacitv  of  each  system  as  com- 
pared with  Its  immediate  neighbors,  has  been  already  discussed.  What  this  summary 
table  attempts  is  to  set  up  side  by  side  the  returns  for  all  the  different  regions.  Other- 
wise stated,  this  exhibit  is  intended  to  compare  region  with  region  rather  than  line  with 
line;  and  m  the  background  there  is  always  retained  the  theoretical  standard  for  the 
country  as  a  whole  of  a  5  per  cent  return  on  valuation.  The  measure  of  success  there- 
fore, 18  the  relative  approximation  of  the  earning  capacitv  of  each  system  to  that 
figure. 


Systems. 


Trunk  line  region: 


1.  Pennsylvania. . . 

2.  New  Vork  Central [[[[""[[[[ 

3.  Baltimore  <fc  Ohio- Reading 

4.  Erie-Leliigh  Valley- Wabash .'.','.'". 

5.  Lackawanna-Nickel  Plate 

Chesapeake  Bay  region: 

6.  Chesajr)eake  A;  Ohio 

7.  Norfolk  A  Western-Virginian.  .*.'.'.**.'. 

8.  New  England  regional ' 

9.  Michigan  peninsula 

Southeastern  region: 

10.  Southern  Railway 

11.  Atlantic  Ckiast  Line-LouisviUe&  NasiiVuie 

12.  Illinois  Central 

13.  Seaboard  Air  Line '.'.'.'.". 

14.  Florida  East  Coast .  ....'....*  * ' .' 

Western  transcontinent  alregion: 

15.  Union  Pacific-North  Western... 

16.  Burlington-Northern  Pacific. . 

17.  St.  Paul-Great  Northern .[ 

18.  Rock  Island-Southern  Pacific... 

19.  SantaFe 

Southwestern-Gulf  region: 

20.  Frisco 

21.  Missouri  Pacific *' i 


Revenue 
ton-miles. 


47,871,000,000 
38,477,000,000 
29,118,000,000 
27,770,000,000 
16,9X6,000,000 


12, 22S, 

17,223, 

8,204, 

3,171, 

11, 916, 

13, 757, 

14,637, 

2,117, 

414, 


000,000 
000,000 
000,000 
000,000 

000,000 
000,000 
000,000 
000,000 
000,000 


Average 
mileage  of 
road  oper- 
ated. 


Investment'  Percentage 
'     inroad     i    relation; 
andequip-|P«^.operat- 

1  mentper  ^"g."ieo™e 
Imileofline.i  ^omvest- 
I     ment. 


25,342,000,000 
27,937,000,000 
24,103,000,000 
19,63.s,000,000 
13,097,000,000 

10,499,000,000 
14,930,000,000 


11,276 

11,414 

8,252 

7,612 

4,879 

2,761 
3,382 
6,796 
3,680 

10,489 

14, 170 

9,389 

3,630 

764 

20,747 
22,889 
20,768 
19,655 
11,977 

12,588 
13,564 


$169,465 
138, 787 
133,215 
162,995 
143,118 


121,101 

128,831 

102,497 

49,626 

75,392 
48,634 
58,005 
54,515 
67,236 

67,656 
64,408 
61,304 
68,680 
65,582 

72,924 
57,920 


4.50 
6.11 
5.14 
4.28 
4.39 

5.46 
6.18 
5.33 
3.23 

4.31 
5.34 
4.83 
3.45 
4.74 

5.55 
5.39 
5.62 
4^69 
5.64 

13.80 
3.75 


1  Corrected. 


63 1.  C.  C. 


s 


CONSOLIDATIOX   OF  RAILROADS. 


641 


The  actual  results  shown  by  the  grand  summary  are,  in  the  first  place,  a  substantial 
uniformity  for  the  trunk  line  and  Chesapeake  railroads,  seven  systems  in  all.  For 
these  the  range  lies  between  4.28  per  cent  and  6.18  per  cent.  And  of  these  seven 
systems,  five  lie  practically  between  4.5  per  cent  and  5.5  per  cent.  Two,  it  is  true, 
run  substantially  higher.  The  New  England  regional  system  in  1917  likewise  fell 
within  this  group,  approximating  a  return  of  somewhat  above  5  per  cent.  For  the 
southeast,  the  range  is  fairly  close  and  on  the  whole  not  very  different  from  that  of 
the  trunk  line  systems,  llie  only  exception  is  the  Seaboard,  which  drops  below 
4  per  cent,  along  with  the  Michigan  peninsula  group.  With  these  exceptions,  all  of 
the  14  systems  proposed,  lying  east  of  the  Mississippi,  appear  to  be  reasonably  close 
to  the  norm.  Passing  beyond  the  Mississippi,  a  striking  difference  between  the 
transcontinental  systems  and  those  of  the  Southwestern-Gulf  region  emerges.  The 
returns  for  the  former  are  even  closer  together  than  are  those  of  the  trunk  lines .  They 
are  all  comprehended  between  4.69  per  cent  and  5.64  per  cent.  This  statistical  con- 
centration within  an  outside  range  of  less  than  1  per  cent  is  beUeved  to  be  noteworthy. 
For  the  Southwestern-Gulf  systems,  while  as  between  themselves  within  that  region 
the  returns  are  well  in  line,  as  contrasted  with  the  transcontinental  group  they  are 
distinctly  subnormal.  Whether,  however,  this  subnormality  is  actual — ^that  is  to 
say,  due  to  a  defective  earning  power — or  whether  it  is  merely  apparent,  arising  from 
an  overstatement  of  capital  account,  is  another  matter.  That  is  reserved  for  subse- 
quent discussion  in  connection  with  physical  valuation.  Probably  both  of  these 
elements  are  of  weight.  But  this,  at  least,  may  be  offered  in  extenuation,  that  the 
subnormality  of  the  southwest  is  not  a  creation  of  this  plan,  nor  is  it  e\idently  exag- 
gerated by  it.  The  conditions  there  existent  have  long  been  well  understood.  Their 
final  correction  may  be  brought  about  only  through  the  growth  and  development  of 
the  countrv. 

The  last  step  in  financial  analysis  is  theoretically  necessary  and  in  a  measure  prac- 
ticable. The  systems  herein  proposed  are  intended  to  be  matched  one  against  another 
to  the  end  that  the  net  operating  income  in  percentage  of  investment  shall  be  the 
same  for  all.  For  each  region  thus  far,  it  mil  be  noted,  this  test  has  been  applied  by 
taking  the  net  operating  income  for  the  year  1917  as  a  percentage  of  the  property 
account.  But  this  so-called  investment  account  is  purely  a  book  statement  as  to 
capital.  It  may  or  may  not  reflect  the  actual  investment.  The  supreme  test  must 
be  applied  by  checking  everything  in  terms  of  financial  valuation.  Thus  alone  can 
it  be  determined  whether  the  so-called  investment  account  affords  a  dependable 
basis  for  a  calculation  of  the  rate  of  return.  One  may  now  turn  to  the  records  of  the 
valuation  division  of  the  Interstate  Commerce  Conmiission  in  order  to  check  up  the 
capital  account. 

Returns  as  yet  available  from  the  valuation  division  are  of  course  mainly  working 
papers.  Only  a  very  few  final  valuations  have  as  yet  been  made  by  the  Commission. 
Therefore  most  of  the  data  is  still  only  tentative.  The  returns  may  be  regarded 
rather  as  straws  showing  the  direction  of  the  wind;  that  is  to  say,  affording  an  indica- 
tion as  to  whether  the  investment  account  is  understated,  normal,  or  inflated.  The 
following  table  comprises  the  returns  as  of  the  dates  indicated,  for  all  those  roads  for 
which  the  engineering  report,  the  land  valuation,  and  the  accounting  report  have 
been  rendered.  At  the  same  time  the  recorded  investment  in  road  and  equipment 
for  the  corresponding  date  is  afforded . 

The  accompanying  table,  then,  exliibits  the  results  thus  far  available  concerning 
physical  valuation.  The  figures  include  road  and  equipment  and  land  value.  These 
data,  in  other  words,  comprehend  only  the  engineering  and  real-estate  values.  No 
reports  as  yet  from  the  accounting  division  are  available.  This  last-named  report 
will  afford  an  analysis  of  the  recorded  investment  account,  eliminating  such  items  as 

G3 1.  C.  C. 


t 


/ 


/ 


/ 


/ 


642 


INTERSTATE   COMMERCE  COMMISSION   REPORTS. 


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CONSOLIDATION    OF   RAILROADS. 


643 


di8C0unt  on  securities  and  those  which  are  not  in  accord  with  the  standardized  form  of 
capital  accounts.  Nor  is  appreciation  or  depreciation  fully  rejected  in  these  figures. 
The  latter  is  deducted  in  column  4,  in  order  to  produce  the  total  present  value.  But 
total  present  value,  as  the  recorded  data  show  in  periods  like  the  last  five  years  char- 
acterized by  rapidly  mounting  prices,  may  be  quite  misleading.  Certainly  a  total 
present  value  as  of  1914  for  the  Boston  &  Elaine  is  quite  incomparable  with  a  corre- 
sponding ligure  for  the  Central  Vermont  taken  three  years  later.  A  superMcial  exami- 
nation of  the  phenomenal  price  changes  during  that  period  suffices  to  discredit  all 
such  comparisons.  The  force  and  purpose  of  this  recital  of  qualifications  is  not  that 
it  may  totally  discredit  the  exhibit,  it  ehould  nevertheless  establish  the  need  of 
interpretation  only  in  the  very  broade>t  and  most  general  terms.  The  chance  of  erroi 
is  certainly  magnified  l)y  these  circumstances. 

Turning  now  from  means  and  methods  of  valuation  to  results,  the  carriers  may  best 
be  treated  in  the  great  regional  groups  utilized  for  consolidation  purposes.  Consider- 
able testimony  along  the  same  line  wa^  adduced  in  Ex  Parte  74  by  Mr.  T.  W.  Ihilme. 
Most  of  his  statistical  data  concerned  the  same  properties  as  are  comprehended  in  this 
exhibit.  His  conclusion  was  that  valuation  was  substantially  more  than  capital 
account  for  New  England,  and  for  the  eastern  and  southern  regions  as  a  whole.  <>nly 
for  the  roads  west  of  the  Mississippi  did  he  acknowledge  that  reproduction  cost  of  road 
and  equii)ment  showed  a  slight  deiiciency  imder  the  capital  accoimt;  and  even  for 
these  western  roads  he  excluded  the  so-called  standard  properties,  such  as  the  Bur- 
lington, the  North  Western,  the  llock  Island,  etc.  He  contended,  furthermore,  that 
appreciation  would  probably  more  than  coimterbalance  the  depreciation  during  the 
years  interve:iing  since  the  date  of  examination.  It  is  pertinent  at  this  point  to  test 
the  soundness  of  these  allegations  by  reference  to  the  statistical  exhibit  herewith  and 
then  to  apply  the  conclusions  very  broadly  to  the  matter  in  hand. 

The  ratio  of  present  value  to  recorded  investment,  as  shown  by  the  last  column 
of  tliis  exhibit,  is  very  imeven  for  the  New  England  group.  It  varies  from  125  per 
cent— a  hea\'y  excess  of  valuation  over  capital  account— for  the  New  Haven,  to  108 
per  cent  for  the  Boston  &  Maine,  falling  to  practical  equivalence  for  the  Maine  Central 
and  the  Central  Vermont,  and  to  a  deficit  of  18  per  cent  for  the  Bangor  &  Aroostook. 
But  the  valuation  dates,  it  should  be  noted,  cover  a  range  of  three  years,  characterized 
by  fast  mounting  prices.  The  only  trunk  lines  cited  are  the  Chicago  &  Eastern 
Illinois,  with  present  value  at  78  per  cent  of  recorded  uivestmenf.  the  Big  Four,  at 
85  per  cent:  the  New  York.  Ontario  &  Western,  at  43  per  cent;  and  the  Pere  Marquette, 
at  64  per  cent.  For  the  Virginian  Railway  the  corresponding  figure  is  only  54  per  cent . 
None  of  these  roads  is  in  the  most  thickly  settled  and  highly  developed  region,  and 
several  of  them  are  distinctly  subnormal  financially.  The  somewhat  disquietirg 
retunis  for  these  roads,  therefore,  need  not  necessarily  shake  one's  confidence  in  a 
full  valuation  or  even  an  excess  for  the  first-class  roads  like  the  Pennsylvania  and  the 
New  York  Central.  No  data  fc-  the  Erie  or  the  Baltimore  &  Ohio  are  available. 
The  returns  for  trunk  line  territory,  however,  are  on  the  whole  not  as  reassuring  as  the 
testimony  in  Ex  Parte  74  makes  it  appear.^ 

For  the  southeastern  region,  wherein,  according  to  Ex  Parte  74,  the  capital  account 
stands  strongly  reanforce:l  by  valuation  data,  the  same  variability  is  apparent.  The 
Central  of  Georgia  manifests  an  excess  of  valuation  at  lOG  per  cent,  the  Florida  East 
Coast  and  the  Mobile  &  Ohio  stand  in  the  neighborhood  at  90  pei:  cent,  while  the 
Georgia  Southern  &  Florida  drops  to  73  per  cent.  For  the  Atlanta,  Birmingham  & 
Atlantic  the  deficit  is  large.  There  is  nothing  especially  to  shake  the  testimony  of 
Mr.  Hulme,  yet  it  is  quite  apparent  that  the  conditions  are  most  uneven  as  between 

«  For  turther  discussion  of  investment  account  for  the  trunk  lines  compare  The  Five  Per  Cent  Case, 
31 1.  C.  C,  351,  and  idem,  32,  328;  and  for  the  anthracita  coal  roads  35  idem,  2«),  etc 

63 1.  C.  C. 


i 


4 


63 1.  C.  0. 


»i 


644 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


CONSOLIDATION   OF   RAILROADS. 


645 


i 


one  property  and  another.     Some  will  be  ^oasly  ov^ervalued  and  others  perhaps  under- 
capitalized.   Such  data  as  is  herewith  afforded  betrays  the  same  irr^ularity  for  the 
western  roads  as  for  the  southeast.     Tlie  Rock  Island  is  surprisingly  sound  with  a 
practical  correspondence  of  present  value  and  recorded  investment.    At  the  other 
extreme  stands  the  Western  Pacific,  now  undergoing  reorganization,  with  present 
value  constituting  only  39  per  cent  of  investment  accoimt.    And  the  San  Pedro,  too, 
is  low  at  52.8  per  cent.    Probably,  and  this  confirms  the  general  impression,  con- 
ditions will  be  found  more. uniform  in  the  Southwestern-Gulf  region  tlian  almost  any- 
where else  in  the  coimtry.    This  valuation  table  includes  the  two  most  prosperous 
properties  in  that  territory.     For  the  St.  LouLs  Southwestern  the  present  value  is 
only  52  per  cent  of  recorded  investment:  for  the  Kansas  City  Southern  it  is  only  38 
per  cent.    In  view  of  the  long  record  of  bankruptcies  and  reorganization  for  most  of 
the  roads  hereabouts,  the  conclusion  is  inescapable  that  an  excessive  property  valua- 
tion will  have  to  be  dealt  with.     Applying  this  conclusion  to  the  matter  in  hand, 
namely,  the  percentages  of  return  figiurable  under  this  plan  for  the  proposed  Frisco 
and  Missouri  Pacific  systenjis  of  less  than  3.5  per  cent,  it  is  evident  that  the  actual 
rate  of  return  is  substantially  higher  than  this  figure.    Whether  it  is  enough  higher. 
in  the  light  of  due  correction  of  the  investment  account,  to  bring  the  results  for  these 
properties  to  a  parity  with  those  for  the  trunk  lines,  the  southeastern  states  and  the 
transcontinental  roads,  must  be  only  a  matter  of  surmise.    But  incontrovertibly  the 
effect  of  any  aiid  all  corrections  must  be  in  the  direction  of  a  regional  uniformity  for 
the  country  as  a  whole.    Seeking,  as  this  plan  proposes,  to  produce  an  even-handed 
distribution  of  earning  power  under  a  given  schedule  of  rates,  there  is  some  comfort 
at  least  to  be  drawn  from  this  conclusion. 

Examination  of  transportation  conditions  iii  the  preparation  of  this  report  has 
disclosed  a  number  of  substantial  advantages  which  might  be  attained  through  the 
lai^er-scale  operation  which  such  consolidation  permits.  One  or  two  of  these  may  be 
mentioned  in  passing  as  indicative  of  the  trend  of  events.  One  in  particular  is  the 
greater  proportion  of  solid  train  movement  from  points  of  origin  through  to  destination, 
specially  with  the  creation  of  shipping  days  between  the  less  important  places,  which 
thus  permits  of  solid  train  movement  from  the  primary  yard  at  least  to  the  neighbor- 
hood of  destination.  The  improvements  recently  put  into  effect  on  the  Pennsylvania 
Railroad  for  coal  and  coke  traffic  and  also  in  the  carriage  of  steel,  illustrate  the  point. 
Among  the  advantages  are  the  avoidance  of  congestion  by  better  train  loading,  more 
expeditious  serWce,  and  lessened  expense  through  the  constant  breaking  up  of  trains 
and  switching  of  cars  en  route  as  well  as  an  improved  car  supply  in  times  of  business 
acti\dty. 

It  is  somewhat  difficult  to  predict  accurately  the  effect  of  a  larger-scale  operation 
under  consolidation  upon  the  several  individual  properties.  The  earning  power  of 
some  of  them  which  have  already  attained  some  of  the  foregoing  efficiencies  through 
a  high  degree  of  specialization  of  function  will  perhaps  be  lessened.  Roads  like  the 
Kansas  City  Southern,  for  example,  which  have  concentrated  upon  one  class  of  business, 
such  as  the  carriage  of  grain  for  export,  will  undoubtedly,  as  parts  of  a  larger  system, 
display  less  concentrated  energy  in  the  solicitation  of  such  business.  This  may  not 
always  be  an  unmixed  loss.  There  can  be  no  doubt  that  an  undue  solicitation  of  traffic 
by  the  device  of  shrinkage  of  the  proportional  rate  and  similar  means  has  contributed 
to  the  earning  power  of  particular  lines.  In  so  far  as  the  movement  of  this  traffic  has 
not  been  forced  or  unnatural,  this  is  as  it  should  be.  But  it  is  also  conceivable  that 
a  less  highly  specialized  and  a  more  simple  and  natural  movement  of  tonnage  may 
follow  under  such  new  conditions  as  are  here  proposed. 

Another  operating  economy,  conducive  it  is  believed  to  efficiency  through  a  better 
utilization  of  the  fixed  investment,  is  a  considerable  elaboration  of  the  device  of 
trackage.    The  principle,  embodied  for  the  first  time  in  the  transportation  act  of 

63 1.  C.  C. 


1920,  that  it  is  economically  sound  and  socially  expedient  to  avoid  useless  duplication 
of  facilities,  is  clearly  illustrated  in  this  connection.    Already  and  for  many  years 
trackage  has  been  taken  by  the  existing  railroads  either  because  a  carrier  was  too 
weak  financially  to  duplicate  a  line  already  in  operation,  or  because  the  road  in 
question  was  not  for  most  purposes  a  competitor  and  therefore  could  afford  to  strengthen 
the  lessee  carrier.    There  is  a  surprising  frequency  of  downright  gaps  in  the  very 
heart  of  some  of  the  great  systems.    Whole  divisions,  even  on  the  mam  line,  will  be 
found  not  owned,  reliance  being  had  upon  long-time  traffic  agreements.    The  Rock 
Island,  for  example,  is  honeycombed  with  such  trackage,  in  many  cases  the  contracts 
being  very  much  more  favorable  as  to  maintenance  than  could  have  been  expected 
under  downright  ownership.    For  54  miles  on  the  main  line  into  Kansas  City  from 
the  east  and  67  miles  westward  to  Topeka,  the  Rock  Island  apparently  is  just  bs  well 
able  to  afford  service  as  if  it  owned  the  rails  instead  of  merely  taking  trackage. 
Another  significant  example  occurs  between  Paris  and  Dallas,  Tex.    This  trackage 
is  merely  a  branch  line  of  the  Santa  Fe  system,  but  it  is  necessary  as  a  through  con- 
nection for  the  shortest  passenger  service  of  the  Frisco  between  St.  Louis  and  San 
Antonio.    The  Santa  Fe  at  present  takes  the  Frisco  trains  over  this  stretch  with 
their  entire  crews  and  engines  somewhat  as  the  Baltimore  &  Ohio  operates  into  Jersey 
City  over  the  Reading-Jersey  Central  rails.    But  in  the  former  case  a  branch  line 
of  rails  is  utilized  for  a  main-line  equipment  and  service.    Unless  both  roadbed  and 
equipment  conform  in  character,  there  is  obviously  always  the  danger  of  a  roadbed 
not  developed  to  the  standard  of  the  rolling  stock.    The  highest  degree  of  pubUc 
safety  is  not  promoted  by  such  maladjustment.    This  plan  proposes  wherever  pos- 
sible to  unify  the  control  of  the  roadbed  and  the  control  of  the  running  equipment 
in  the  same  hands.    It  is  needless  to  multiply  illustrations,  but  everywhere  one 
discovers  instances  of  such  economy  in  construction  through  the  joint  use  of  an 
existing  line.    The  recommendation  in  the  Southwestern-Gulf  territory  for  the 
allowance  of  trackage  over  the  Kansas  City  Southern  line  (made  a  part  of  the  Missouri 
Pacific  system  under  this  plan)  to  the  Frisco  system,  affords  an  extreme  illustration 
«f  the  principle.    Here  are  two  great  systems,  the  Frisco  and  the  Missouri  Pacific, 
which  it  is  proposed  to  match  as  even-handedly  as  may  be  against  one  another  in 
the  Southwestern-Gulf  region.    The  Kansas  City  Southern  more  naturally  falls  to 
the  Missouri  Pacific  system,  but  there  is  one  link  in  it  (map  25)  from  Texarkana  to 
Hartford  Junction,  Okla.,  which  crosses  an  inhospitable  territory  which  is  not  likely 
to  support  another  parallel  line.    Unless  the  competing  Frisco  system  be  given 
trackage,  it  will  be  greatly  handicapped  in  competition  between  Kansas  City  and  New 
Orleans.    Therefore,  if  this  link  will  not  be  congested  by  the  traffic  from  these  two 
directly  competing  systems,  it  is  believed  to  be  in  the  public  interest  that  they  should 
jointly  contribute  to  the  support  of  the  bridge,  even  although  they  are  directly  com- 
peting one  with  another.    Everywhere,  as  in  this  instance,  where  trackage  may  be 
had,  even  as  between  direct  competitors,  the  device  has  been  resorted  to  freely. 
When  the  traffic  develops  to  a  point  where  the  single  line  is  outgrown,  it  may  then 
be  double-tracked  or  a  new  link  be  constructed.    What  actually  happens  is  that 
competition  arises  between  different  sets  of  operators  over  a  common  highway,  a 
principle  which  75  years  ago  it  was  believed  would  be  applicable  as  a  general  railway 
policy.    Unreservedly  applied  such  competition  breaks  down,  perhaps,  because  of 
the  lack  of  responsibility  for  maintenance  of  the  roadway,  if  no  one  of  the  operators 
is  accountable  for  it.     But  where  one  line  owns  and  it  can  be  made  serviceable  to 
others,  even  though  they  be  direct  competitors,  it  is  believed  that  useless  duplication 
of  facilities  is  thereby  avoided  to  common  advantage. 

Carehil  analysis  of  prevalent  conditions  respecting  traffic  interchange  strengthens 
the  conviction  that  certain  practices  prevail  which  call  for  correction.  A  carrier  too 
often  refuses  to  interchange  business  destined  for  intermediate  points  within  its  own 


63  I.  C.  C. 

63763—21- 


13 


•  /  .     ». 


646 


INTERSTATE   COMMERCE   COMMISSION   REPORTS. 


territory,  while  doing  so,  somewhat  grudgingly  perhaps,  on  business  which  is  truly 
competitive  because  of  the  existence  of  rival  routes.  Thus,  for  example,  at  Denver, 
it  is  alleged  that  the  Union  Pacific  will  not  now  accept  business  on  equal  terms  for 
Colorado  or  Utah  points  with  those  accorded  to  traffic  solicited  from  Pacific  coast 
tenninals.  Such  conditions  practically  exclude  the  Rock  Island,  the  Missouri 
Pacific,  and  other  companies  having  stub  ends  of  line  in  Colorado  from  effective 
participation  in  local  business.  It  might  conceivably  greatly  strengthen  such  stub 
ends  were  authority  to  be  conferred  upon  the  Commission  to  require  interchange 
upon  petition  and  hearing.  It  is  not  unlikely  that  some  such  jurisdiction  may  be 
necessary  in  order  to  fully  protect  the  stub  ends  which  can  not  possibly  all  be  cared 
for  under  this  plan. 

As  indicating  the  trend  of  transportation  events  abroad,  it  is  significant  that  mergers 
are  well  under  way  in  the  British  Isles  since  the  war.    The  government's  declaration 
that,  if  parliament  approves,  it  proposes  to  group  the  railways  into  large  systems  upon 
the  termination  of  control  in  August,  1921,  is  already  having  an  effect.    The  Hull  & 
Bamsley  Company,  which  was  built  specifically  to  compete  with  the  London  & 
Northeastern,  has  already  provisionally  agreed  to  amalgamate.    The  London  &  North- 
western has  just  announced  the  terms  upon  which  it  offers  to  exchange  its  securities 
for  the  Lancashire  &  Yorkshire  Railway.    The  way  has  been  prepared  by  close 
cooperation,  especially  under  government  operation  during  the  war.    The  Lancashire 
&  Yorkshire  is  not  a  large  property,  and  yet  the  Manchester  Guardian  refers  to  the 
merger  as  "the  biggest  all-out  purchase  that  has  ever  taken  place  in  railway  history." 
It  is  hoped  to  be  able  to  procure  further  data  upon  the  policy  of  the  government, 
correspondence  having  abeady  been  instituted  to  that  end.    From  Canada  also  comes 
the  proposal  from  Lord  Shaughnessy,  president  of  the  Canadian  Pacific  Railway,  in 
April,  in  a  letter  to  the  premier.    A  merger,  making  for  administration  and  operation 
of  the  entire  Canadian  national  railways  by  the  Canadian  Pacific  would,  it  is  allied, 
bring  about  such  economies  as  to  greatly  lessen  the  current  deficit. 

The  defects  and  shortcoming  of  this  comprehensive  scheme  are  manifold  and  in 
many  cases  self-evident.    No  illusion  need  be  entertained  in  this  regard.    The  out- 
come is  avowedly  almost  everywhere  a  compromise,  a  choice  between  evils.    All 
of  the  warring  and  conflicting  interests;  all  of  the  hopes,  aspirations,  fears,  and  preju- 
dices have  come  home  to  roost  in  the  course  of  its  preparation.    An  extraordinary 
amount  of  friendliness  and  cooperation  has  been  encountered.    But,  as  is  inherent 
Mid  natural  i  nder  the  circumstances,  much  of  this  assistance  has  necessarily  been 
circumscribed  by  the  particular  interest  of  the  participants;  and  a  governmental 
plan,  in  contradistinction  to  one  projected  for  private  profit  or  interest,  may  not 
content  itself  with  caring  even  for  most  of  the  properties.    It  must  of  necessity  recog- 
nize the  right  and  the  interest  of  every  last  one  of  them.     It  is  this  requirement  of 
universality  which  so  often  compels  the  halfway  expedient,  the  compromise,  the  solu- 
tion which  falls  so  far  short  of  the  ideal.    And  then,  again,  there  are  the  class  interests 
which  deserve  recognition.     Administrative  influences  impel  one  in  certain  direc- 
tions; the  bankers  would  have  some  matters  otherwise;  the  representatives  of  the 
employees  entertain  quite  positive  views,  it  may  be;  and  all  of  the  shippers'  organiza- 
tions have  to  be  satisfied.    But  despite  these  divergent  interests,  the  desirability, 
nay  more,  the  downright  necessity  for  the  furtherance  of  consolidation  on  a  large  scale 
as  a  remedy  for  the  existing  situation  is  almost  universally  conceded. 

63 1.  C.  C. 


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INDEX  TO  RAILROADS. 


Akron,  Canton  &  Youngstown,  500. 

Alabama  &  Vicksburg,  542,  626,  651. 

Alabama  Great  Southern,  541,  651. 

Ann  Arbor,  503,  649. 

Arizona  &  New  Mexico,  605. 

Atchison,  Topeka  &  Santa  Fe,  562,  563,  579,  592,  604,  605,  609,  612,^13,  620,  SI,  ,637j 

640,  653,  655. 
Atlanta  &  West  Point,  544,  651. 
Atlanta,  Birmingham  &  Atlantic,  483,  542,  642. 
Atlantic  Coast  Line,  537,  538,  ^53,  555,  640,  651,  655. 
Baltimore  &  Ohio,  486,  490,  492,  501,  502,  507,  516,  640,  648,  655. 
Bangor  &  Aroostook,  512,  516,  642,  649. 
Bessemer  &  Lake  Erie,  496,  497. 
Boston  &  Albany,  510,  511,  512,  517,  523,  649. 
Boston  &  Maine,  510,  511,  512,  516,  522,  523,  642,  649. 
Brownwood  North  &  South,  623. 

Buffalo,  Rochester  &  Pittsburgh,  498,  500,  501,  520,  521. 
Burlington.    See  Chicago,  Burlington  &  Quincy. 
Canada  Southern,  505. 
Canadian  Pacific,  511,  513,  524. 

CaroUna,  Clinchfield  &  Ohio,  528,  538,  540,  541,  544,  550,  651. 
Central  New  England,  506,  650. 
Central  of  Georgia,  539,  543,  551,  642,  651. 
Central  of  New  Jersey,  490,  491,  493,  506,  511,  648. 
Central  Pacific,  564,  575,  579,  580,  652. 
Central  Vermont,  512,  523,  642. 
Charleston' &  Western  Carolina,  544,  651. 
Chesapeake  &  Ohio,  526,  533,  534,  540,  552,  638,  640,  650,  655. 
Chicago  &  Alton,  563,  590,  606,  621,  627,  653. 
Chicago  &  Eastern  Illinois,  599,  633,  642,  652,  654. 
Chicago  &  North  Western,  567,  568,  573,  574,  612,  613,  652. 
Chicago,  Burlington  &  Quincy,  539,  559,  561,  564,  565,  567,  571,  573,  574,  590,  592, 

599,  603,  612,  613,  631,  640,  652,  655. 
Chicago  Great  Western,  482,  563,  567,  573,  574,  575,  593,  652. 
Chicago,  Indianapolis  &  Louisville,  490,  545,  648. 
Chicago,  Milwaukee  &  Gary,  599,  652. 
Chicago,  Milwaukee  &  St.  Paul,  564,  570,  571,  573,  574,  592,  594,  597,  605,  612,  613, 

640,  652,  655. 
Chicago,  Peoria  &  St.  Louis,  482,  603. 
Chicago,  Rock  Island  &  Pacific,  559,  573,  574,  591,  592,  593,  600,  609,  613,  615,  620, 

625,  627,  640,  642,  644,  653,  655. 
Chicago,  St.  Paul,  Minneapolis  &  Omaha,  593. 
Chicago,  Terre  Haute  &  Southeastern,  573,  598,  652. 
Choctaw,  Oklahoma  &  Gulf,  601. 
Cincinnati,  Hamilton  &  Dayton,  490. 
Cincinnati,  Indianapolis  &  Western,  490,  648. 

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INTEBSTATE  COMMERCE  COMMISSION  REPORTS. 


Cincinnati,  New  Orleans  &  Texas  Pacific,  541,  660. 

Cincinnati  Northern,  648. 

Cleveland,  Cincinnati,  Chicago  &  St.  Louis,  643,  648. 

Clover  Leaf.    See  Toledo,  St.  Louis  &  Western. 

Colorado  &  Southern,  589,  594,  607,  608,  626,  631,  654. 

Columbus,  Sandusky  &  Hocking,  489,  531. 

Cumberland  Valley,  492,  494. 

Delaware  &  Hudson,  495,  511,  413,  649. 

Delaware,  Lackawanna  &  Western,  486,  499,  501,  506,  507,  515,  521,  638,  640,  04:^,  ($55 

Denver  &  Rio  Grande,  561,  564,  591,  592,  631,  652. 

Denver  A  St.  Lake,  591,  592,  652. 

Detroit  &  Mackinaw,  504,  649. 

Detroit  &  Toledo  Shore  Line,  499. 

Detroit,  Grand  Haven  &  Milwaukee,  649. 

Detroit,  Toledo  &  Ironton,  505. 

Duluth  &  Iron  Range,  596,  653. 

Duluth,  Missabe  &  Northern,  596,  653.  , 

Elgin,  Joliet  &  Eastern,  599. 

El  Paso  &  Southwestern,  600,  602,  609,  653. 

Erie  Railroad,  486,  487,  495,  506,  507,  514,  517,  640,  649,  655. 

Florida  Eaf»t  (bast,  555,  6-40,  042,  651,  655. 

Fort  Smith  &  Western,  616,  617,  630,  653. 

Fort  Worth  .V  Denver  <Hty,  607,  631,  654. 

Fort  Worth  &  Rio  Grande,  611,  623. 

Franklin  &  \hbeville,  605. 

Frisco.    See  St.  I^ouis-San  Francisco. 

Geoi^a,  650. 

Georsria  A:  Florida,  544,  552,  651. 

Georgia  Southern  A  Florida,  541,547,  642,  643,  650,  rsi. 

Grand  Rapids  &  Indiana,  504,  648. 

Grand  Trunk,  496.  511,  513,  523,  524. 

Grand  Trunk  Western,  499,  649. 

Great  Northern,  567,  570,  571,  591,  593,  594,  595,  605,  612,  013,  640,  652,  655. 

Gulf  &  Ship  Inland,  651. 

Gull  <k)a9t  Lines,  607,  615,  6.32. 

Gulf,  Colorado  &  Santa  Fe,  611,  622. 

Hannibal  ^  St.  Joseph,  603. 

Hocking  Valley,  530,  650. 

Houston  &  Brazos  Valley,  605. 

HoiL^n,  East  &  West  Texas,  626,  633. 

Illinois  Central,  537,  53S,  546,  548,  555,  573,  574,  593,  594,  619,  637,  640,  351,  655. 

Indiana  Harbor  Belt,  648. 

International  &  Great  Northern,  617,  628,  632,  651. 

Kanawha  &  Michigan,  488,  529,  648. 

Kansas  City,  Clinton  &  Springfield,  623. 

Kansas  City,  Fort  Scott  &  Memphis,  621. 

Kansas  City,  Memphis  &  Birmingham.    See  St.  Louis-San  Francisco.   ' 

Kansas  City,  Mexico  &  Orient,  602,  615,  622,  653,  654. 

Kansas  City  Southern,  608,  615,  617,  618,  625,  628,  632,  639,  642,  644,  645,  654. 

Kansas,  Oklahoma  &  Gulf,  629. 

Katy.    See  Missouri,  Kansas  &  Texas. 

Lackawanna.    See  Delaware,  Lackawanna  &  Western. 

Lake  Erie  &  Western,  482,  488,  499,  649. 

Lake  Shore  &  Michigan  Southern,  574. . 


CONSOLIDATION  OF  RAILROADS. 


659 


Lehigh  &  Hudson  River,  492,  506,  511,  514,  520. 
Lehigh  &  New  England,  492,  506,  511,  514,  520,  521,  650. 
Lehigh  Valley,  486,  496,  506,  511,  514,  640,  649,  655. 
Long  Island,  648. 
Los  Angeles  &  Salt  Lake,  642,  652. 
Louisiana  &  Arkansas,  616,  630,  654. 

Louisiana  RaUway  &  Navigation  Company,  607,  615,  616,  617,  625,  629,  653. 
Louisville  &  Nashville,  537,  538,  551,  552,  555,  620,  637,  640,  651,  655. 
Louisville,  Henderson  &  St.  Louis,  651. 
Maine  Central,  512,  516,  642,  650. 
Maryland,  Delaware  &  Virginia,  648. 
Michigan  Central,  503,  505,  648. 
Midland  Valley,  604,  616,  617. 
Minneapolis  &  St.  Louis,  563,  593,  594,  599,  652. 
Minneapolis,  St.  Paul  &  Sault  Ste.  Marie,  595,  653. 
Mississippi  Central,  651. 
Missouri  &  North  Arkansas,  611,  613,  617. 
Missouri,  Kansas  &  Oklahoma.    See  Missouri,  Kansas  &  Texas. 
Missouri,  Kansas  &  Texas,  575,  615,  617,  618,  623,  652,  653. 
Missouri,  Oklahoma  &  Gulf,  654. 

Missouri  Pacific,  559,  593,  607,  610,  615,  617,  624,  626,  628,  630,  644,  654,  655. 
Mobile  &  Ohio,  538,  539,  594,  595,  642,  643,  650. 
Monon.    See  Chicago,  Indianapolis  &  Louisville. 
Monongahela  Connecting,  497. 
Montour,  498. 

Nashville,  Chattanooga  &  St.  Louis,  651. 
New  Jersey  &  New  York,  649. 
New  Orleans  &  Northeastern,  541,  650. 
New  Orleans  Great  Northern,  542,,  650. 
New  Orleans,  Texaa  &  Mexico.    See  Gulf  Coast  Lines. 

New  York  Central  &  Hudson  River,  486,  491,  492,  501,  507,  513,  514,  516.  574.  640. 
648,655. 

New  York,  Chicago  &  St.  Louis,  482,  486,  487,  494,  499,  501,  507,  515,  638,  649,  655. 

New  York,  New  Haven  &  Hartford,  489,  496,  509,  510,  511,  512,  515,  516,  642,  650. 

New  York,  Ontario  &  Western,  495,  514,  642,  643,  649. 

New  York,  Susquehanna  &  Western,  649. 

Nickel  Plate.    See  New  York,  Chicago  &  St.  Louis. 

Norfolk  &  Western,  489,  526,  528,  529,  531,  532,  533,  545,  547,  550,  638,  650,  655. 

Norfolk  Southern  Railroad,  545,  657. 

Northern  Ohio,  500. 

Northern  Pacific,  567,  570,  571,  590,  591,  613,  652. 

North  Western.    See  Chicago  &  North  Western. 

Northwestern  Pacific,  605,  653. 

Oregon  &  California,  586,  587,  589. 

Oregon  Short  Line.    See  Union  Pacific. 

Pennsylvania,  486,  489,  492,  501,  506,  507,  511,  512,  514,  531,  532,  638,  640,  648,  655- 

Pere  Marquette,  494,  501,  642,  649. 

Philadelphia  &  Reading,  490,  491,  492,  507,  520,  640,  648. 

Pittsburgh  &  Lake  Erie,  496,  648. 

Pittsburg  &  Shawmut,  498,  649. 

Pittsburgh  &  West  Virginia,  494,  500,  501,  649. 

Pittsburg,  Bessemer  &  Lake  Erie.    See  Bessemer  &  Lake  Erie- 

Kttsburgh,  Cincinnati,  Chicago  &  St.  Louis,  497. 

Httsburgh,  Fort  Wayne  &  Chicago.   See  Pennsylvania. 


\ 


i  lirv 


I! 


f 

i 


'1111' 


660 


INTERSTATE  COMMERCE  COMMISSION  REPORTS. 


Pittsburg,  Shawmut  &  Northern,  498,  649. 

Reading.    See  Philadelphia  &  Reading. 

Rock  Island.    See  Chicago,  Rock  Island  &  Pacific. 

Rutland,  489,  495,  512,  648. 

St.  Louis,  Iron  Mountain  &  Southern.    See  Missouri  Pacific. 

St.  Louis,  Keokuk  &  Northwestern,  603. 

St.  Louis-San  Francisco,  M7,  549,  563,  611,  615,  617,  618,  621,  624,  627,  640,  653,  655. 

St.  Louis  Southwestern,  602,  615,  617,  618,  624,  642,  644,  652,  653. 

St.  Paul.    See  Chicago,  Milwaukee  &  St.  Paul. 

San  Antonio  &  Aransas  Pass,  604,  607,  653. 

San  Antonio,  Uvalde  &  Gulf,  605. 

San  Diego  &  Arizona,  605. 

San  Pedro,  Los  Angeles  &  Salt  Lake.    See  Los  Angeles  &  Salt  Lake. 

Santa  Fe.    See  Atchison,  Topeka  &  Santa  Fe. 

Seaboard  Air  Line,  537,  538,  546,  552,  555,  638,  640,  652,  655. 

Soo.    See  Minneapolis,  St.  Paul  &  Sault  Ste.  Marie. 

Southern,  536.  538,  539,  553,  555,  620,  650,  655. 

Southern  Pacific,  560,  575,  578,  579,  588,  589,  600,  605,  608,  613,  625,  637,  653,  655. 

Spokane,  Portland  &  Seattle,  573,  600. 

Tennessee  Central,  550,  651. 

Texarkana  &  Fort  Smith,  618,  654. 

Texas  &  Pacific,  602,  607,  617,  625,  628,  632,  654. 

Texas  Mexican,  604,  653. 

Texas  Midland,  604. 

Toledo  &  Ohio  <^entral,  488,  500,  529,  650. 

Tolpdo,  St.  Louis  &  Western,  499,  501,  649. 

Trinity  &  Brazos  Valley,  607,  609,  620,  653. 

Union,  497. 

Union  Pacific,  539,  biS,  559,  500,  573,  588,  589,  608,  612,  613,  627,  652,  655. 

Vickshurg,  Shreveport  &  Pacific,  603,  604,  626. 

Virginian,  526,  529,  530,  533,  642,  650,  655. 

Wabash,  482,  496.  505,  507,  573,  575,  593,  627,  640,  649,  652. 

Washington  &  Old  Dominion,  501. 

Western  Maryland,  492,  493,  501,  649. 

Western  of  Alabama,  514,  651. 

Western  Pacific,  561,  564,  591,  642,  652. 

West  Jersey  &  Sea  Shore,  648. 

West  Shore,  493,  496. 

Wheeling  &  Lake  Erie,  500,  501,  649. 

Wichita  Falls  &  Northwestern,  653. 

Winston-Salem  Southbound,  642. 

Wisconsin  Central.    See  Minneapolis,  St.  Paul  &  Sault  Ste.  Marie. 

Worcester,  Nashua  &  Portland,  489,  517. 

Yazoo  &  Mississippi  Valley,  548,  550. 

Zanesville  &  Western,  500,  529,  649. 


MAPI 
:»10yt\HQ  AVAVLABLt:  5TCM> 

TRUNK  LINE  TERRITORY 


63763—21 .     (To  face  page  660. )    No.  1. 


63783—21.     (To  face  page  660.)    No.  2. 


T 


V-, 


'-^'^^.y 


'^ 


Oo 


/ 


,/ 


O«h-o«t 


J^ 


X? 


lis 


> 


t 

I 

i 
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\ 


\ 


\S<f^ 


V 


T\o 


*V^o?Jt 


'/ 


*V«»' 


rce»' 


X*^ 


V. 


A 


£>2> 


u/e^  V 


»,^t*v»or9 


\ 


• 


\ 


V''       ) 


v.- 


/>y 


LC»nc« 


inn«i*i 


K 


/ 


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rst-Looia 


>^*' 

^4^^ 


lLDOta>'> 


r.We 


\ 


/ 


/ 


y 


KEY 
\^V,..^    /  —  New  York  Cen^-roU 
'.    \j/      — «-  LQkcErie8«Wes^rn.(0m«««d) 
\       X^  —I—   ToUdo8i0hioCcnHTal(0m»^*«l) 

••••«    Kanowho  8e  Michigan^pmitted) 
■  Cirvcinno^i  Nor+hcm. 

PhnQdelphio8fRcadin3g£Sli 

Trackage 

^•— ^  Rot\and 
mn  Michigan  Ccntrol 
MAP  3 

THE  NEW  YORK  CENTRAL  SYSTEM 

Excludtn^^Hft 
L.«k6Evi«A>V«sUrn  ToUdo  aiOhio 
Cerrtral  and  Konoi*»ho  mMichigon  Rij. 


7' 


iiro 


r 


— \ 


IL 


.y 


J 


(•.;W>3~21.    (To  face  page  660.)    No.  3. 


KEY 

Baltimore  &Ohio. 
-  Ph.U&Reod.-CcntotNJ— ► 

Wesi^ern  Mart^land. 

Chiclnd.  &  ljoui5viUe(Monon) 

Cin.jnd.&(  Western 
Lehigh  &  New  E-n^land 
Lehigh  &  Hud  son. 

N.Y.N. H.&H 

MAP  4 
THE  BALTO.  a.  OHIO  —  RtA0lN6  SYS. 

Including 
TV«e  Ctn+r^l  R.R. OftNtwOerse*^    and 
The  Monon . 


63763 — 21.     (To  face  page  6C0.)    No.  4. 


6376a— 21.     (To  face  page  660.)     No.  6. 


63763 — 21.     (To  face  page  660.)    No.  6. 


63763—21.     (To  face  page  660.)    No.  7. 


ManistiQUC. 


V 


\ 


\ 


V 


V 


\ 


\ 


\ 


/ 


/ 


/ 


% 


^^^ 


^  ^^tV^L^^  .^^PVt 


\  \ 


\a 


/ 


/ 


tr/ 


/ 


/. 


/ 


\ 


\ 


/  /**' 


Manitovroc 


/ 


I; 


/ 


Ludin< 


/ 


/. 


/, 


/ 


I       / 


/ 


/^ 


/ 


y> 


inoj 


•'A 


[Milwaukee 


W^"= 


/ 


/ 


^<^; 


/ 


A 


»(/^ 


NiagartjRjlls 


•RortHoron 


Buffalo 


)KtSfanleu 


rV^ 


o<^ 


Kalamozj 


*    /   VT  «  ^ 4««-     «    ••'S   'liar 


Chico( 


Jplict 


\ 


-i-##^" 


^^nir-\---^^"'^^^ 


Fort  Wayne' 


Cleveland 


-^ •' 

MAP  7A 
MICHIGAN  RAILROADS 


KEY 

Michigan  Central  (NYCSys+em) 

**♦*»•  IfereManaoctte. 

-*-*-  Grand  Trunk. 

====  Ann  Arbor. 

"=*  Grand  RGpid5&lnd.(f%rin.Syslcm). 
;  -•-^  Detroit  8»MQclimac. 
•  _ —  New  York  Central  Si^stem. 
i Ferries  and  Boat  Lines. I 


63763—21.     (To  face  page  660.)    No.  7a. 


63763 — 21.     (To  face  page  660.)     No.  8. 


KEY 

Chesa.  &  Ohia 

Norfolk  &Weatern. 

•••••  Virginian. 

Corolina.Clinch.  tiOhio. 

RsnnsylvdnJo. 
Tolcdo&Ohio  Cen+ra! 
KoMotuha  ft  Michigan 

MAP  9 

TKC  (:kesapeake  group 

IncIwdtnjHie 
Norfolk  aiW«5ttrp,Ch%wp*oke  &  Ohio, 
Vtryniwn  R«j.,TeUdo  h  Ohio  Cenfrat/ 
and  Kanawho  &Michi9an  Raitraad. 


!i 


I 


63763—21.     (To  face  page  660.)    No.  9. 


MAP  10 
SOUTHERN  RAIIWAY  STSTEM 


KEY 

Souihetn  RaUwa(|. 

Mobile  &  Ohio. 
**  Aloboma  ft Vicksborg. 

Nev^  Orleans  ft  Nor+heoafern. 
— * —  New  Orleans  Great  Northern. 
eeorgia  Soofhem  ft  Flol'ida. 

Cqrolina^CUnchfield  ft  Ohio. 


I 


63703—21.     (To  face  page  660.)    No.  10. 


[St.  Louis 


\ 

\      Cincinnoti 


Corbi*^ 


\ 


:iiWp^*^' 


2 


n5h*.-So\em 


»hvi)le 


^fknoxvnley 


-.^V 


( 


• 


l^'-^- 


"to^ 


\ 


^tlonVo 


<OQUsta 


.0<^ 


^*»'»A 


^^ 


V 


Alboni 


/ 
.     / 

7       ^-i 


-^' 


ifhaeleslon 


)a\AinnaK 


-onswick 


jcKsonvi 


Ue 


MAP  11 

LOUISVILLE  Ci  NASHVILLE, 
ATLANTIC  GCAST  UNE  5Y6TEM 


KEY 

Louisville  ftNoshvllIe 

Atlantic  Coast  Line. 

Norfolk  SooHicm. 
*—  Atlonttj  Birmin9hQm  &Atlantic. 
=  Oeorgia  fir  Florida. 
=*  Carolina, Clinchfield  &Ohi«. 
—  Norfolk  &  Western. 

Honda  East  Coast 


I 
I 

f 

I 


63763 — 21.     (To  face  page  660.)     No.  11. 


i 


6376S— 21.     (To  face  page  660.)     No.  12. 


63763 — 21.     (To  face  page  660.)    No.  18. 


08709—21.     (To  face  pace  660.)     No.  14. 


5 


KEY 

Union  Pacific. 

Chicago  &  Nor+hwes*«-n 
»— —  Cerrtttjl  Fbcific- 
»«»«  V^bo9h. 
■MM  Chico9o6reatW(e9t«m. 
—^^  Minneopoli»6St.Looi«. 
>—  SanfUro,LosAn9eies8i5aHLxik« 
fVoposed  Hxjckoge. 

St.Joaeph  &  Grond  Island. 


63763—21.     (To  face  page  660.)    No.  15. 


M 


rw9fw!aRr 


;  *-•• 


--■•-f 


V 


v^i/ 


v.. 


K 


Spokone  J< 


,'»6reat?alU 


»Bcnd 


SterlinjCitv^] 


\ 


\ 


8on  fVtancbcof 


\ 


\ 


\ 


\ 


\ 


\ 


\^7>4?r^^ 


^ — '1 

I 
i 


L 


<^ 


VwteiTONvn  "^fc  I 


/   .X— v...-- 


>0,^^ 


Ohnwlct 


irshal) 

Pe^  Moines 


lit  Lake  Ci^ 

I 


-<^ffr^^^ 


K*Rtoria 


Qofsero 


11 


lR>eljl< 


iKonaos  Cii 


«Ji 


>' 


v.^- 


KEY 

Chlco90,  Burlington  flrCKiin^ 

Northern  Pacitic. 

Denver  fit  Rio  Grande. 

Weatem  Racitic. 

Chicago  Great  Western. 

Minneapolie  8r  St.  Louts 

CWico^e^Rocklolond  StRacifie 

Denver  fir  Salt  Lake. 

Colorado  ftSouthernf — Rirtof  St^stem  omitted.) 

Minn.. St. Paul  aS.S.Morie. 


./' 


X 


y^fbrtWbr+K 


...j» 


I  N 


Galveston 

MAP  16 
BURLIN6T0N-N0RTHERN  PACIFIC  SYSTEM 


^ 


63763 — 21.     (To  face  page  660.)    No.  16. 


I 

i 

( 


I 


63763 — 21.     (To  face  page  660.)    No.  17. 


KEY 

Union  fbcitic. 
Chieo^o.MiK  fl(5t.  foot. 
Chica90,Burlin3ton  flrQutncvj. 
Great  Northern. 
Chicogo  &  Nerthwesten^. 
Northern  Ascitic. 


63763—21.     (To  face  page  660.)    No.  17a. 


63763—21.     (To  face  page  660.)    No.  10. 


g3763 — 21.     (To  face  page  660.)    No.  21. 


■"  ira  —liB 


63763 — 21.     (To  face  page  660.)    No.  22. 


KEY 

ChfcC090,Rock  Island  fiiRicitic. 

-  SoM^hcrn  Pacific 

-  El  Paso  &  Soothwca^-em 
»  5t  Louis  Sooth wea+ern 

•-   Son  Antonio  BiAranaosRass. 

-  Vickaborg^Shrcvcport&Rjcific 
»•  Texas- Mexi  con. 

-  Midland  Valley. 
-•  Missouri  Racific. 
«—  Texos  Midland- 


03763 — 21.     (To  face  page  660.)    No.  23. 


63763—21.     (To  face  page  660.)    No.  24. 


i 


Chicc 


KEY 

0      St. Louis  &  5an  Froncisco 

tM»»    St. Louis  Southwestern. 

Mi9aoori,Kon»os8i  Texas. 

—It—    KonsosCity^MejiicoJf  Orient 

=    Chica9o8iAlton. 

ot  9   .  Looisiona  Ry.&Navi  potion  Co. 

iiinmitiii    Trinitu&i  Brazos Vo  I  Icvj. 

•*■•*'■*'    Vicksbut-9,5hrevepor+6fFbcific 


mm 


bol 


Higbee- 
Kansas  CitiL^^j^^ss^^y- 
rFronklii#-v 


lew  I 


.IW-.^'' 


t.  Louis 


/ 


'^iou      '' 


Jii 


jN^**" 


Forgon  •^*% 


/initi 


Guthrie  •-  >;l„o- 


lueKogeel 


Tort  Smith 


/ 


BrinkleijJ^'^ 


'       ^  ^Memphis 


LIHleRocV 


^.    /^iV'*' 


Vyfchito  Foils  k^  -^O^r''^^*!!^^^^^^^^^^ 


?f^ 


Fort  Worth 


DqUqs       ^ 


»Sinnin9hqa 


y 


7r-'^- 


/oco 


51  LOUIS  «iSAN  FRANCISCO  SYSTEM 

COMPRISING 
FRISCO(PART);3TLOUIS-50UTHWE5TCRN 
(PART)M-^^^NAV.CO.;CHICA60  arALTON 
M.K.&T.;AND  K.CM.&OXPART) 


/  "'^  • — —ICHouston 

•Son  Antonio 


X\«?^ 


0< 


\eP^ 


Galveston 


g3763__2l.     (To  face  page  660.)    No.  25. 


63763—21.    (To  face  page  660.)    No.  26. 


(53763—21.     (To  face  page  660. )    No.  26a. 


Q+tle 


^ 


Por^'lond 


Spokone 


st^S^i^SilS::^^*' y\^o 


BoHe 


■•..---1 


Z''^ 


ST) 


^^7siiz~Ji%'^^''i^^^ 


,0-^.>4 


.o^o- 


J^^. 


^M 


^ot^htirn 


H 


'n, 


''^a 


Ada 


'« 


3t.  Paul 


V 


/ 


■"'"=<> 


>* 


I — /-. 


On 


:^n  Pocjf, 


I 


I 


'^ 


e/-/7 


i/ 


[Sal^LokeCiti) 


Lbo 


'O— O'li  o— O^o^ 


But  f alo^fe^r^fe*^  x&^'V  c5/»/?^ 


.'^'"V, 


0^  ot>w7X:!rbr^  -  No*^ 


Dc 


'«^^//A7j^Sn 


»<»o 


«Qj 


o  ucnver 


Boston 


^  & 


/^P^' •  D^«^"^';s^ 


\ 


\ 


San 

FrcnciSCO 


\ 


\ 


\ 


L.J^^-.— 


I 


7^':5-: 


^"^^^af^s: 


•  ^^^<f^^ 


\ 


\i 


'\ 


'^^' 


V^ 


soji 


th* 


"-.-^...J 


— p^^^— -— ,     ^^ 


^.'f. - iv^^ 


I 


"<?«:%,_  RicHnTond  . 

^<*  lYesfe'rn      /\ 


/ 


VO* 


! 


,iiiiii»*' 


■tui»* 


' I 


\ 


\^ 


N. 


..J 


•^oa  vannoh 


vJocksonville 


•  •  •   /Ve>v  VbrA  Central. 

—^-^^^Lackaiyanna-Nick/c  Piafc. 
—•••••  Pcnnsyl^^onia. 
■  ■  ■  ■    Ba/timote  S/  Ohio. 
Chesapeake,  Sijstems. 


San  An+onio 


'New  Orleans 


6alves+on 


'"^^^^Ilhnois  Cenira/. 

—•^^tLoui^- Frisco.       Soufhern. 

oococo  Minsouri  Fhcific.     •♦■*^-**  L.Br  H-  ACL. 

Seaboard  Air  Line. 


Iliiiniuinll 


-  MAP  Zl  - 
MAIN  STEMS 
OF 
PROPOSED  RAILWAY  SYSTEMS 


v\At>niNu'ro.\  :  guvernmsnt  pbinxino  onicm :  i92i 


63763—21.     (To  face  page  660.)    No.  27. 


u 


Tr 


% 


mm 


\ 


/nsH 


fJULlim 


NEH 


..  p    . 

Date 

Due 

-Q?Hh 

3^t 

^^VWi^ 

4- 

1 

y\  fiV'i"^ 

u^ 

72^ 

^ 

RPR  6 

1964 

J 

L 

•  •    •  ^ 


Jl  JTSO 


\irn  33d 


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